ITM Power: Defence Deal Adds a Strategic Edge to a Pivotal Catalyst Week

ITM Power partners with Rheinmetall for NATO synthetic fuel plants, awaits £46.5M Chronos grant decision, and enters MSCI Small Cap index – stock tests 170p resistance.

The partnership with Rheinmetall is quietly reshaping the investment case for ITM Power. The two companies agreed in April to collaborate on the Giga PtX project, an ambitious plan to build hundreds of decentralised production sites across Europe for synthetic fuels tailored to NATO forces. Each plant will have an electrolysis capacity of up to 50 megawatts and churn out 5,000 to 7,000 tonnes of e-fuel annually. The initial focus lands on Britain, where defence projects operate under a different calculus: energy security, robust supply chains and independence trump pure electricity price logic.

That strategic pivot arrives just as the stock navigates two closely packed events. On 26 May the UK subsidy authority will rule on a £46.5 million grant for the Chronos automated production line at ITM’s Sheffield facility. Three days later, on 29 May, ITM Power officially enters the MSCI United Kingdom Small Cap Index, triggering forced buying from passive funds and ETFs that track the benchmark.

The share price closed the latest available session at 163.20 pence, marginally above the 200-day moving average of 161.30 pence. That level had already been breached on 15 May, when the stock settled at 161.30 pence and gave medium-term traders a technical signal that momentum was stabilising. Since then the price has oscillated between 156.80 pence and 168.30 pence, with the 170-pence mark emerging as the next resistance.

But the rally has not been smooth. One previous session saw the stock drop 7.4 per cent on turnover of 13.2 million shares, a bout of profit-taking after the equity had punched fresh highs. The twin catalysts this week could either reinforce the upward trajectory or test the recent breakout.

Chronos is the centrepiece of ITM’s industrial transformation. The line is designed to manufacture electrolysers of two megawatts each and is expected to cut unit costs by 40 per cent, lifting annual capacity to one gigawatt. ITM has already received £40 million from Great British Energy, the publicly owned energy company and its largest single investor. A positive grant decision on 26 May would smooth the path for a final investment decision on Chronos, expected by management in June 2026.

The project pipeline beyond Chronos adds further layers of visibility. For Uniper’s Humber H2ub facility at Killingholme, ITM has signed a front-end engineering and design contract to supply six POSEIDON modules, each with 20 megawatts. The final investment decision is pencilled in for 2026, with commercial operations targeted for 2029. Additional agreements include a 150-megawatt capacity reservation with RWE and deals in Germany totalling more than 710 megawatts. The Worley alliance also gives ITM access to external project pipelines, as the engineering group adds the Neptune V electrolyser to its portfolio for mid-sized hydrogen schemes.

Operationally, the company is making progress but remains loss-making. First-half revenue for the 2026 financial year hit a record £18 million, prompting management to lift the full-year forecast to between £40 million and £43 million. The order book stands at £152 million, with 71 per cent of contracts deemed profitable — a break with the loss-making projects of the past. Yet the pretax loss for the year to April 2025 widened to £45.4 million from £27.1 million a year earlier. Cash reserves of £198 million and zero debt give the balance sheet breathing room; Jefferies reckons liquidity will last until at least 2028.

Analyst opinion is sharply divided. Jefferies upgraded the stock on 7 May to Buy and raised its price target from 115 to 200 pence, forecasting revenue of £41 million for the current fiscal year and £71 million by 2028, when it expects positive EBITDA. Morgan Stanley also turned bullish, upgrading ITM to Overweight with a 170-pence target and naming it the first UK hydrogen stock the bank has backed since 2021. The Swiss bank UBS, however, sticks at Neutral with a 60-pence target, arguing that too much operational improvement is already priced in.

Short term, the unfolding week will determine whether the stock can hold the zone around 161 pence. A green light on the grant and a smooth index inclusion would reinforce the scaling story. Any disappointment could quickly test the technical breakout that has given ITM its best momentum in months.