For decades, hydrogen has been the “just around the corner” hope to decarbonize transportation fuel. How much of a setback would it be if Nikola runs out of money before its ambitious hydrogen-powered truck and fueling infrastructure plans are realized?
“If Nikola doesn’t make it, the big blow is really from what would happen to the hydrogen infrastructure system it has begun developing,” said Mike Ramsey, a Gartner Inc. vice president and analyst who covers future mobility.
“Certainly, there is the potential for others to pick up the assets and IP [intellectual property] and do something more. But it will slow things down considerably. Other manufacturers have been working on fuel cells and trucks, but they aren’t at the center of their product.”
Hydrogen’s future is secure with or without Nikola
Tier 1 engine and power distribution supplier Cummins Inc. is making a big play in manufacturing electrolyzers for making hydrogen. The future of hydrogen is secure with or without Nikola, Amy Adams, Cummins vice president of fuel cells and hydrogen, told FreightWaves.
Nikola distracted itself from its original pursuit of hydrogen and fuel cell electric vehicles (FCEVs) by assembling battery-electric trucks as its first product. With more than 300 Tre BEVs produced at a greenfield plant in Coolidge, Arizona, Nikola is targeting production of its first Tre FCEV units in the fourth quarter.
Customers like Anheuser-Busch InBev are eager to deploy zero-emissions fuel cell trucks as part of meeting their sustainability goals. Hydrogen fuel station development for heavy-duty trucks trails FCEVs. Nikola’s answer is mobile hydrogen refueling, trucking gaseous hydrogen to customer locations until its plans for 60 hydrogen stations by 2026 develop.
So far, four of those stations have been identified in California, where hydrogen demand follows low-carbon regulations that would remove diesel-powered trucks from the state’s highways by 2040 or sooner. Nikola has tested fuel cell trucks with Anheuser-Busch and drayage and logistics provider TTSI in the Golden State.
Money is running out; Nikola’s future tied shareholder vote
But Nikola’s reality is that it is almost out of money to make trucks and develop hydrogen infrastructure.
Nikola secured $100 million in new capital through a public stock offering, nearly two-thirds of which was purchased in a direct sale to hedge fund Antara Capital, which loaned Nikola $200 million last year. In exchange for buying the new shares, Antara required Nikola to propose the doubling of its outstanding shares at the company’s annual meeting on June 7.
Nikola wants to pay interest in stock instead of cash “we may not have” even though the interest would be 11% on stock payments versus 8% on cash, it said in the proxy.
Triggering a change of control?
A reading of the proxy statement shows that under Nasdaq rules, Nikola might trigger a change of control in the company by issuing more than 19.9% of its total outstanding shares to pay Antara.
It took Nikola four tries to win shareholder approval for a more modest increase in authorized shares from 600 million to 800 million in August. Doubling the number of outstanding shares to 1.6 billion would significantly dilute current holders, whose holdings traded Tuesday just under $1 a share after falling as low as 81 cents.
If Proposal 2 regarding the increase in authorized shares fails, Nikola will keep trying to get the measure passed as it did last year when it hired a proxy solicitation firm to run down unvoted shares.
In Nikola’s absence, who would fill the gap?
If Nikola goes out of business — something company detractors have been predicting since late 2020 — who would be most likely to step in?
On the fuel cell truck side, likely candidates include Hyundai Motor Corp., the South Korean automaker that is bringing its Xcient fuel cell truck to the U.S., and Toyota Motor Corp., the Japanese manufacturer said in 2021 that would begin building heavy-duty fuel cell modules at a plant in Kentucky.
Neither of those companies addresses where the hydrogen fuel for their vehicles would come from. Toyota and Hyundai sell small numbers of fuel cell passenger vehicles in California, the only state with a semblance of a hydrogen fuel infrastructure.
“True acceptance for long-haul on-highway operation is contingent on the infrastructure being there to support long-distance operation, plus the prices will need to come down,” said Antti Lindstrom, a trucking analyst at S&P Global Mobility.
FirstElement Fuel Inc. developed, owns and operates 29 True Zero hydrogen refueling stations in California. It is working with Hyundai on test fueling of the Xcient at some of the True Zero stations and through a high-capacity mobile refueler.
What of Nikola’s infrastructure plans?
That doesn’t address other locations like the Midwest, where Nikola is partnering to get hydrogen to support customers like PGT Trucking, which signed a letter of intent to purchase 100 Nikola fuel cell trucks.
It could get station support from a major oil producer like BP, which is purchasing TravelCenters of America, a Nikola hydrogen station development partner. Former BP executive Carey Mendes is president of Nikola’s energy business.
BP was in negotiations with Nikola for hydrogen station development before Nikola fell from grace over shenanigans by founder Trevor Milton revealed by short seller Hindenburg Research in September 2020. Milton was convicted on three counts of fraud in a federal trial in October. He faces sentencing June 27.
Nikola has announced plans for up to 300 metric tons per day of hydrogen creation to fuel its fleet of fuel cell trucks and those of others like startup Hyzon Motors. What would become of these partnership efforts?
- City of Buckeye, Arizona, Phoenix Production Hub — phased development of up to 150 metric tons per day (TPD).
- Plug Power — multi-region offtake agreement of up to 125 metric TPD.
- Terre Haute, Indiana, Wabash Valley Resources, 50 metric TPD.
- Crossfield, Alberta, TC Energy, 60 metric TPD.
- Clinton County, Pennsylvania, KeyState, 100 metric TPD.
Battery-electric vehicles have a significant lead over hydrogen, and Nikola could presumably support its hydrogen ambitions by selling more battery-electric trucks, Lindstrom said.
However, it currently costs Nikola more to produce a Tre BEV than it can charge for it. So production has slowed to one or two trucks a day. It could build as many as five a day.
The Tre BEV has more battery packs and offers a longer range between chargings than many competitors. But legacy truck makers have the advantage of manufacturing expertise and scale that Nikola doesn’t.
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