J.P. Morgan Chase and Co. Analyst, Bill Peterson, lowered today Nikola’s price target from $12 to $10 representing an upside of 24.38%. The analyst reiterated Nikola’s Neutral rating. The company reported yesterday its financial results for the quarter and full-year ended December 31, 2021. Today, also Deutsche Bank reiterated Nikola with a Hold rating, lowering price target to $11 from $19. Shares jumped almost 18% after Earnings Report on yesterday’s session closing at $8.04.
During yesterday’s Earnings Call, J.P. Morgan Analyst asked for several themes, here transcripted:
Bill Peterson, J.P. Morgan Analyst
Thanks for taking my questions this morning and providing a lot of the details in the press release, as well as on the call thus far. On the hydrogen infrastructure, you mentioned in the release you expect basically to find locations break ground and begin production. It seems like it’s somewhat of a delay relative to what we saw in the last quarter.
So I was hoping you can provide an update on your hydrogen production plans, I guess, using your own electrolyzers, as well as some of the timing of the partnerships that were announced last quarter? And then maybe wrapping that up like what are your commitments financially at least in these production partnerships?
Mark Russel, Chief Executive Officer
So, Bill, let me answer the first part of that and then I’ll ask Kim to talk about the financing, and they are related because of the partnerships we’ve been able to line up. And you are correct that we’re not where we wanted to be at this point. We wanted to be further — we wanted to have something announced by now. But we’re — our commitment is to get something announced and ground broken and get construction commenced on both the first hub and the first stations this year.
So we are — we’re committed to making more progress going forward. This turns out to be — this turns out to be a difficult thing to do. We knew it would be difficult, but it’s been more difficult than we anticipated to actually get the first locations permitted ground broken construction commenced because we haven’t done it yet. I can tell you we are close.
It’s not for lack of work and effort. We have an extraordinary team on this as well. And I’m confident that once we get to the point of actually breaking ground and commencing construction, we’ll be able to go quickly as we’ve proven with the construction of our manufacturing facilities. These facilities are — you got to remember one other thing about these facilities is they are going to be fairly unique in the world.
The first hub that we build will be somewhat of a unique facility in the world to produce hydrogen at commercial scale from hydrogen electrolysis. In some cases, we’ll be using petroleum sources and capturing carbon at WVR in Indiana. And we may actually add that to other hub facilities as well. But the basis of these facilities will be hydrogen electrolysis, making hydrogen from water using electricity.
That’s the reason we have that APS rate you see on that slide. That’s the reason that we have those partnerships with Nel on electrolysis. That’s the reason we have the partnership with TransCanada or TC Energy rather, where TC Energy has the balance sheet and the capital budget and the strategic intent to get into this business. That’s why this is just a marriage between us made in heaven because we have the demand for the hydrogen, they have an intent to get in the business of making hydrogen and moving it around.
And we get together and we can — they are happy to help us build the facilities, and in some cases, bring locations. They have locations that are all — many locations that are already ideally suited for potential hub production. They’re going to be great partners for us. We have the right pieces of the puzzle in place and now it’s about execution.
That’s what this has all been about from the beginning is getting the concept and the model and the plan into execution. So that’s our challenge this year is to do that. Kim, do you want to talk about the financing?
Kim Brady, Chief Financial Officer
Yeah, Bill, the way you want to think about this is that, as you know, as we announce hubs, as well as dispensing locations, hubs will be in special purpose vehicles, so you will be off balance sheet. And the way we should think about is that the asset or the project will typically be financed with 70% debt, 30% equity, and that equity could be owned by Nikola, as well as TC Energy. And in many of those situations, because Nikola, our cash concerns, we are going to be very capital efficient in first few stations, we may purposely decide that we will own very little equity. However, an off-take agreement with the hub will be 100% Nikola, we will control the molecules.
And so we’ll be controlling and marketing and selling hydrogen to our customers. And then let’s think about dispensing locations. When we have talked about previously with respect to on-site gaseous generation, we discussed capex of $16 million, $17 million, $20 million per station. We are looking at mostly dispensing locations where we will not be generating hydrogen.
What that means is that cost for dispensing stations will likely be around $8 million, potentially $9 million per station. And many of these stations once again, we are looking at various partnership arrangements, such as partners, such as TA, where we’re leveraging their own existing footprint, and we’ll be building small dispensing locations where capex could be funded by both parties. And we are also talking to third parties, who will actually fund the capex, and then once again, we control delivering molecules to the dispensing locations. So what I’m telling you is that we are going to be highly capital efficient.
And to the extent that we can execute asset light approach, but still control molecules, we are going to do that.
Mark Russell, Chief Executive Officer
And in the case of a large operator with a large terminal of trucks, where they want fueling inside their operation behind the fence, that’s what — the reason we have that partnership with Opel, that’s what they specialized in. And in that case, we expect the capital to be provided by the operator of the terminal and/or Opel probably in combination. The other thing to remember is all of this is replicated in Europe. It’s slightly different in Europe, but the basic structure will be the same.
One of the part that’s being played by TCE here in North America and Europe, that part will be played by OGE, which like TCE is one of the largest pipeline operators in Europe, and you’ll see a similar approach in Europe. There’s some slight differences in that. We have the advantage of working through that with IVECO because they have an established network of not only dealers, but gaseous fuel supply that they’ve already established on the natural gas side. So that enables us to help piggyback that, especially since OGE depend — intends to deliver the hydrogen in the same manner that they’re currently delivering natural gas to those existing stations.
So Europe is substantially ahead on that front. We’re emphasizing North America here a little bit because that’s where we have to hit first, Europe will be just behind that, and also Europe is actually a little bit ahead in terms of infrastructure.
Bill Peterson, J.P. Morgan Analyst
Thanks for all the details. That makes sense. Sticking on hydrogen, I guess, the fuel-cell EV, you talked about the milestones for this year with successful alpha and basically build test and validate beta. I guess what are the key learnings or areas you’re looking, I guess, to improve that you’re applying for beta? And then I guess, just clarification, is this beta — is this planned for just internal testing or is this going to be planned with your lead partners there? And then finally, I think somebody asked earlier about more customers.
Yesterday, the company announced that it has appointed Lynn Forester de Rothschildto its Board of Directors. Forester de Rothschild is a co-founder of Inclusive Capital Partners (“In-Cap”) and will now represent the group on the board, replacing In-Cap co-founder, Jeff Ubben.
“Lynn’s work in environmental and social issues will be a real asset to Nikola’s board as we execute on our many strategic and business priorities,” said Steve Girsky, chairman of Nikola’s Board of Directors. “I also want to thank Jeff Ubben for his many contributions to the Nikola Board and for his help transitioning Lynn, who will now represent Inclusive Capital Partners on the Nikola Board.”
Nikola reportedyesterday its financial results for the quarter and full-year ended December 31, 2021. The company looks forward to achieving the following milestones in 2022:
- Deliver 300 – 500 production Nikola Tre BEVs to customers.
- Successful pilot testing of Tre FCEV alpha trucks with AB, TTSI and others.
- Build, test, and validate Tre FCEV beta trucks.
- Announce location, break ground, and commence construction of the first hydrogen production .hub in Arizona.
- Announce two or more dispensing station partners in California.
“During the fourth quarter, we began delivering Pre-Series Tre BEVs to customers and dealers, and we are ramping up production in Coolidge. We anticipate beginning series production of the Tre BEV on March 21. We are laser-focused on delivering vehicles and generating revenue,” said Mark Russell, Nikola’s Chief Executive Officer.
Earlier this week, the company announced that Michael Lohscheller has been named President of Nikola Motor. Reporting to CEO Mark Russell and supported by the team that is already on the ground, he will be responsible for scaling Nikola’s global truck business.
“Michael Lohscheller brings several decades of direct automotive industry expertise to our already accomplished leadership team at Nikola. His role will be immediately pivotal as the Nikola Tre BEV moves into production, and as we continue to achieve development milestones for the Nikola Tre FCEV,” said Nikola Chief Executive Officer Mark Russell.