ITM Power (AIM: ITM) advances 150 MW hydrogen project as Hydropulse targets recurring revenue

ITM Power plc (AIM: ITM), a Sheffield-based manufacturer of industrial electrolysers for green hydrogen production, announced on 12 October 2026 that its Hydropulse subsidiary had signed heads of terms with an unnamed European oil refinery for a proposed 150 MW green hydrogen project. The development envisages using ITM Power’s Alpha electrolyser platform to produce hydrogen on-site under a planned 10-year commercial arrangement. Management is targeting a final investment decision in 2027 and the commencement of hydrogen production in 2029, subject to engineering, financing and definitive agreements. The proposed project would represent ITM Power’s largest commercial commitment if completed, but the financial opportunity is accompanied by a potentially significant change in how the company allocates capital.

ITM Power shares traded approximately 4% to 6% higher during Monday’s session, reflecting a favourable initial reaction to the announcement. The development followed an 8 October guidance upgrade in which the company reduced its expected adjusted EBITDA loss for the financial year ended April 2026 to between £20 million and £21 million. Together, the announcements provide evidence of improving operational performance and a potentially larger commercial opportunity, although the hydrogen project remains at an early contractual stage.

How would the 150 MW Hydropulse refinery project change ITM Power’s revenue model?

ITM Power has traditionally generated revenue through the design, manufacture and supply of electrolyser equipment, together with associated engineering and service activities. The proposed Hydropulse arrangement would introduce a different commercial model under which the subsidiary develops, owns and operates hydrogen-production facilities rather than simply supplying equipment to an external owner.

Under the proposed structure, Hydropulse would build and operate the 150 MW plant, with the refinery expected to receive hydrogen produced at the site under a 10-year agreement. ITM Power would therefore potentially participate in a longer-duration revenue stream linked to hydrogen supply rather than relying solely on equipment deliveries and associated services. The model could broaden earnings visibility once projects are operating, although actual revenue and profit depend on the final commercial terms and plant performance.

The refinery is expected to provide the project site and utilities, including electricity. This proposed arrangement could reduce Hydropulse’s direct exposure to power-price volatility, which is a major variable in green hydrogen production economics. However, the extent of that protection will depend on the definitive contracts, including the treatment of electricity costs, availability, efficiency and any performance obligations.

The 150 MW capacity is a measure of the planned electrolyser installation rather than the amount of hydrogen already being produced or contracted revenue. Actual output would depend on operating hours, electrolyser efficiency, plant availability and the final engineering design. Without confirmed operating assumptions and commercial pricing, the project capacity cannot be converted into a reliable annual revenue forecast.

Why does ITM Power’s build-own-operate strategy introduce new financing requirements?

The Hydropulse model potentially creates longer-term contracted income, but it also involves a different capital structure from the manufacture and sale of equipment. A conventional electrolyser sale generally transfers a substantial portion of the project’s ownership and financing responsibility to the customer. Under a build-own-operate arrangement, the asset-owning subsidiary must secure sufficient capital to construct the plant and support its operation.

ITM Power said discussions with banks regarding project-level financing are progressing. Such financing could allow Hydropulse to fund individual installations without relying entirely on parent-company cash resources, although the eventual mix of debt, equity, guarantees and commercial commitments has not been disclosed. The availability and terms of financing will determine how efficiently the model can be scaled.

Project debt could provide financial leverage where contracted revenues are sufficiently predictable, but it would also introduce repayment obligations and potentially restrictive financing conditions. Lenders would be expected to assess the refinery’s creditworthiness, hydrogen offtake arrangements, construction risks and operating assumptions before committing capital. The announcement does not establish that such financing has been secured.

For shareholders, the commercial question is whether retaining ownership of hydrogen-production assets produces better risk-adjusted returns than selling equipment. A 10-year contractual relationship may support predictable revenue over time, but asset ownership also entails construction exposure, maintenance costs and financing commitments. The economics can only be evaluated once the project’s investment cost, revenue terms and expected returns become clearer.

What does the 2027 investment decision mean for ITM Power’s hydrogen project pipeline?

The parties are already progressing a joint front-end engineering design study, which will inform the technical scope and commercial structure. Management is targeting a final investment decision during 2027, followed by an expected production start in 2029. This timeline leaves a substantial interval between the preliminary agreement and the point at which hydrogen sales might begin contributing operating revenue.

The next development stage will need to establish equipment configuration, construction requirements, utilities integration and refinery interfaces. Engineering work must also clarify operating assumptions and the division of responsibilities between Hydropulse and the customer. Successful completion would strengthen the basis for definitive contracts and financing negotiations.

European oil refining represents a potentially relevant market for low-carbon hydrogen because refineries already consume hydrogen in industrial processes. Replacing conventionally produced hydrogen with electrolytic hydrogen can reduce certain production-related emissions, depending on electricity sourcing and the full operating configuration. Commercial adoption, however, remains sensitive to production costs, policy support and industrial customers’ decarbonisation commitments.

For ITM Power, delivering a large installation at an operating industrial site would provide a commercially relevant reference for its Alpha platform. Such a project could also demonstrate whether the company can manage recurring operational responsibilities beyond its manufacturing activities. The significance would extend beyond the initial installation if the experience subsequently supports further Hydropulse deployments.

Can ITM Power’s improving loss guidance support expansion into hydrogen ownership?

On 8 October, ITM Power upgraded its FY2026 adjusted EBITDA loss guidance to between £20 million and £21 million. Management described the revised outlook as representing a 27% improvement against its previous guidance and a 38% improvement year-on-year. Revenue and cash guidance were unchanged, so the update primarily indicated better expected operating profitability rather than a newly announced increase in sales or liquidity.

The guidance is relevant because the company is pursuing a capital-intensive commercial opportunity while still reporting operating losses. Improving cost efficiency could strengthen its ability to undertake engineering work, support new customer relationships and invest selectively in longer-term projects. Nevertheless, the prospective Hydropulse development should not be treated as evidence that the group has achieved sustainable profitability.

The company is scheduled to announce preliminary results for the year ended 30 April 2026 on 19 October. Those results should provide more detail on gross margins, operating expenditure, cash and the progress of its broader commercial pipeline. Management’s commentary may also clarify how it intends to balance equipment sales with Hydropulse investment.

A useful comparison will be the financial contribution expected from supplying Alpha electrolysers against the potential returns from owning and operating the resulting plant. A business with both equipment manufacturing and long-term hydrogen supply could generate more diversified income, but the additional revenue must be weighed against the capital required and the risks retained on its balance sheet or within project subsidiaries.

The 150 MW refinery proposal strengthens ITM Power’s commercial pipeline and offers a potential route to contracted recurring revenue. However, it remains a project under development rather than a completed equipment sale, operational hydrogen facility or secured decade-long revenue stream. Its next decisive milestones are definitive commercial agreements, a bankable financing structure and the targeted 2027 investment decision.

ITM Power’s 150 MW European refinery hydrogen project: Key takeaways for AIM investors

• Hydropulse signed preliminary heads of terms for a proposed 150 MW project.
• The installation would use ITM Power’s Alpha electrolyser platform.
• A European refinery is expected to receive on-site green hydrogen.
• The planned commercial relationship covers 10 years.
• Front-end engineering work is underway, with a 2027 investment decision targeted.
• Hydrogen production is expected to begin in 2029 if development proceeds.
• Project-level financing remains under discussion with banks.
• ITM Power upgraded FY2026 adjusted EBITDA loss guidance in October.
• Definitive agreements and financing terms will determine the project’s commercial value.