Nel ASA Accelerates with Major Production Expansion

Nel ASA NO0010081235

Investors in the hydrogen sector have been anticipating a decisive move, and Norwegian firm Nel ASA has now delivered. The company's board has given the final investment decision (FID) for a significant scaling of its large-scale production capacity. This strategic shift marks a pivotal transition for Nel, moving from a development-focused entity to one entering the commercialization phase. While shares closed higher on the news, the question remains whether this action can sustain a recovery in a challenging market.

A cornerstone enabling this ambitious expansion is substantial financial backing from the European Union. The EU Innovation Fund has committed to supporting the project with up to €135 million. This grant serves as a critical financial safety net, mitigating risk for the company's balance sheet as it undertakes this capital-intensive endeavor.

The total capital expenditure (CAPEX) for achieving the targeted 1 GW capacity is estimated at approximately 300 million Norwegian Krone, a figure that excludes the coverage provided by the EU grant. CEO Håkon Volldal underscored the economic rationale behind the move, stating that reduced costs and enhanced efficiency are now making business models viable that previously relied on heavy subsidies.

Industrial Scale-Up Begins

The focal point of the investment is a massive expansion at Nel's Herøya plant. The site is set to scale up to a 1 GW production capacity, initiating the industrialization of the company's "Next Generation Pressurized Alkaline" technology—a platform developed over seven years. This new system utilizes prefabricated modules designed to streamline logistics and installation for large-scale projects, ultimately aiming to lower the cost of green hydrogen.

For the market, this represents a clear signal: Nel is exiting a pure R&D mode and committing to commercial scalability. The execution timeline is both specific and ambitious, with commercial operations slated to begin in the first half of 2026 and full delivery capacity expected by 2027.

Market Response and Execution Focus

The stock market responded favorably to the bold expansion plan. On Friday, Nel's share price advanced by 4.11 percent to close at 2.38 NOK. This places the equity approximately 22 percent above its 52-week low of 1.95 NOK. In a sector recently characterized by high interest rates and project delays, Nel's decisive action demonstrates confidence in medium-term demand.

Attention now turns squarely to execution. Technically, the share price has stabilized above short-term moving averages, but the fundamental story hinges on adhering to the project schedule and successfully drawing down the committed EU funds. An initial tranche of over €10 million is anticipated following the FID. Investors will likely scrutinize upcoming quarterly reports for evidence that the project remains within budget and on track for its 2026 launch.