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ITM power (LSE:ITM) shares in It was difficult in 2022. Just today, the shares fell 26% after full-year results were released.
Also contributing to the decline were the resignation of chief executive Dr Graham Cooley after 13 years in charge and a new €140bn EU wind tax on the profits of renewable energy firms.
Looking at ITM Power’s price action, this decline is not accidental. The stock is down 54.5% on the month and 71% on the year. This does not look good considering the year’s incredible energy reserves.
Here I look at the results, what to expect moving forward and if I should invest in ITM Power shares after this historic fall.
Is net zero just a dream?
The UK’s 2050 net-zero ambition is lofty, considering how powerful oil companies are today. The oil lobby is still extremely influential and holds the resources and infrastructure needed to make the transition a success.
But with the larger global economy in a state of uncertainty, the transition to green energy is becoming more expensive, leading to significant increases in consumption for many people.
Are there positives for ITM Power Shares?
First of all, hydrogen fuel is the only net-zero energy source we know of. Its by-products are recyclable. It does not remove oxygen from the atmosphere or add more water vapor, which creates a balance.
ITM Power manufactures electrolyzer systems and develops plants that produce this clean hydrogen fuel. It operates seven hydrogen fueling stations and a 1GW capacity plant in the UK.
In the year By 2022, the company’s contract backlog has grown by 79% to 755 MW. As a result, revenues rose by more than 30% to £5.6m, coupled with significant increases in property and asset inventories.
But the company has posted a record £23.5m loss in 2022. The board expects this figure to rise to £45m-£50m next year, given the company’s massive R&D budget.
Also, to complete existing contracts, ITM Power will need to significantly increase production capacity. The company has raised £250m to expand power production to 5GW by December 2024. However, the board said in the release that achieving this target will be very difficult after the current energy crisis.
The company’s plan to set up a new factory was thwarted by the ever-increasing costs. Now, ITM Power is working on upgrading the output from the Bessemer Park plant to 1.5GW. But given the growing demand, this may be too little.
Should I buy ITM Power shares now?
As a potential investor, I still see many green energy stocks as carrying significant risk given their desire to accelerate development. ITM Power also has this problem. Yes, many government grants and private contracts are being signed by the company. Expansion in the current economic and political climate will cost billions.
With the need for cheap energy more than ever, I think the search for green energy will take a back seat in the coming months.
The ITM Power stocks are currently underwhelming and I have never tried to catch a falling knife. Once signs of a reversal become clear, I will reassess my position. But now a 10-foot pole won’t touch it.