[Funding] S-Fuel Cell Accelerates Steps in Government Hydrogen Economy Promotion

[Asia Economy Reporter Hyungsoo Park] As the government is introducing various measures to revitalize the hydrogen economy, fuel cell system developer S-Fuelcell has embarked on the commercialization of fuel cell power packs. The company plans to invest over 10 billion KRW in research and development over the next three years to launch large-capacity fuel cell power pack products within 2 to 3 years.

According to the Financial Supervisory Service on the 10th, S-Fuelcell will issue 800,000 new shares by allocating 0.14 shares per existing share through a rights offering followed by a general public offering of forfeited shares. The expected issue price is 32,100 KRW per share, raising a total of 25.7 billion KRW.

◆ Fundraising through rights offering= S-Fuelcell will use the raised funds for constructing a new headquarters building, research and development expenses, and raw material purchases.

S-Fuelcell, together with its largest shareholder S-Energy, is constructing a new headquarters in Godeok-dong, Gangdong-gu, Seoul. The new building is scheduled for completion in December 2022, with total construction costs including land acquisition, building, and interior estimated at approximately 35 billion KRW. S-Fuelcell’s share of the cost is 12.3 billion KRW, of which 4 billion KRW will be funded from the capital raised through the rights offering. The remainder will be covered by the company’s own funds.

S-Fuelcell, which manufactures fuel cells for buildings, is developing comprehensive solutions for eco-friendly transportation as a new business. The company aims to enter the transportation market based on fuel cell hybrid power packs. The fuel cell power packs under development are key components for eco-friendly hydrogen transportation means. Research and development are underway to commercialize power packs applicable to drones, forklifts, ships, and vehicles. Of the funds raised through the rights offering, 11.3 billion KRW will be allocated to R&D expenses.

Drones using conventional batteries have the drawback of short flight times under 30 minutes, limiting their usability. To overcome this obstacle and expand drone applications, S-Fuelcell has developed a hydrogen drone equipped with a 2kW-class fuel cell power pack and a liquefied hydrogen tank. It is expected to be widely used in fields such as search, reconnaissance, logistics transportation, and agricultural pest control, which are difficult for battery-powered drones. After research, development, and demonstration phases, the company plans to commercialize the hydrogen drone product by the fourth quarter of next year.

The remaining 10 billion KRW will be used for purchasing raw materials such as fuel converters, air supply devices, and stacks, as well as outsourcing processing costs necessary for assembling fuel cells.

◆ Sufficient liquidity but preparing for the future= S-Fuelcell recorded operating profits for three consecutive years from 2017 to 2019 and raised funds through an initial public offering in October 2018. Considering the sale of treasury shares in July, the company holds sufficient cash liquidity.

Nevertheless, S-Fuelcell is raising funds from shareholders due to expanding opportunities from the domestic hydrogen economy revitalization and intensifying competition. Hanyang Securities, the lead manager of the rights offering, analyzed that if S-Fuelcell fails to achieve its targeted orders due to changes in government policies, intensified competition, or new technology development, it could negatively impact growth and profitability.

As the government focuses on fostering the hydrogen economy, competition in the fuel cell market is intensifying. The fuel cell sector is dominated by S-Fuelcell, Doosan Fuel Cell, and POSCO Energy, but as the market grows, large corporations are increasingly likely to aggressively expand their businesses. To maintain market dominance and secure new growth engines, continuous investment in research and development is inevitable. Since the market is newly emerging, failure to develop and commercialize products first may lead to weakened competitiveness.

Additionally, S-Fuelcell has a high sales proportion from building fuel cells, so diversification of sales is necessary. The sales proportion from power generation fuel cells was 86.5% last year and 88.4% in the first half of this year.

This content was produced with the assistance of AI translation services.