The question

ITM Power (LSE:ITM) has spent most of its history selling electrolyser stacks and systems to developers and industrial customers. On 12 October 2026 its Hydropulse Subsidiary signed heads of terms with an unnamed European oil refinery for a 150MW green hydrogen project under a build, own and operate structure.

About electrolysers

Electrolysers use electricity to split water into hydrogen and oxygen. If the electricity comes from renewable sources, the hydrogen is described as green. ITM Power makes proton exchange membrane electrolysers, a design that responds quickly to changes in power supply, which suits renewable energy. The cost of electricity is the largest operating cost of producing hydrogen, which is why power arrangements matter to any project.

Where ITM stands

The Sheffield-based company designs and manufactures proton exchange membrane electrolysers. Published on 19 October, Revenue for the year to 30 April 2026 rose 68% to £43.6m and the adjusted EBITDA loss narrowed by 39% to £20.2m. Year-end cash was £215.6m, a figure that included a £40m Capital Investment from Great British Energy announced in April. The contract Backlog was stable at £144m, with 83% of contracts described as profitable. For FY27 the company guided to revenue of £50m to £60m and an adjusted EBITDA loss of £17m to £20m. Hydropulse was launched during the year as the group's build-own-operate business.

What the refinery terms say

The refinery would provide the site and utilities, including power, while Hydropulse would build, own and run the electrolysis plant. The planned contract would run for ten years, generating what the company described as long-term contracted and recurring revenue. A joint front-end engineering design study is under way, a final investment decision is targeted for 2027 and hydrogen production is expected to begin in 2029. Volumes and pricing were not disclosed.

Chief executive Dennis Schulz called the agreement an important milestone and said that, if it progressed to definitive agreements, it would be the company's largest commercial commitment to date.

Why the model matters

Under equipment sales, ITM recognises revenue as it builds and delivers stacks, and its Earnings depend on winning a steady flow of new orders. Under build-own-operate, the group would instead hold an asset and earn income over the contract life, potentially smoothing revenue and capturing more value from each project. Having the customer Supply power is significant, because it reduces Hydropulse's exposure to volatile electricity prices, often the largest operating cost in electrolytic hydrogen.

The trade-off is capital. Owning plants ties up money that equipment sales do not. LSE:ITM said it was in constructive discussions with banks on project-level financing to scale Hydropulse in a capital-efficient way, but no terms have been disclosed.

For shareholders, the shift would also change how results should be read. Income from owned plants would arrive gradually once they operate rather than upfront, and the Balance Sheet would increasingly carry project Assets and, potentially, project-level Debt alongside its sizeable existing cash reserves.

Risks and dependencies

Heads of terms are not binding, and the FEED study, the customer's own investment approval and project finance all need to fall into place before 2027. Refinery Demand for green hydrogen in Europe is closely tied to regulation and Subsidy frameworks, which can shift. A ten-year operating commitment also introduces performance and availability risk that a pure equipment supplier does not carry. Meanwhile, the core Business remains loss-making at the EBITDA level, so execution on existing orders and the planned 1GW Chronos stack line in Sheffield, supported by a £46.5m DESNZ grant, competes for management attention and resources.

Reading the FY26 results

Revenue of £43.6m, up 68%, implies prior-year revenue of about £26m. The adjusted EBITDA loss of £20.2m, narrowed by 39%, implies a loss of about £33m the year before. Cash of £215.6m, including the £40m from Great British Energy, is about ten times the annual EBITDA loss, so the company can fund losses for some time. The guidance for FY27 of revenue between £50m and £60m implies growth of about 15% to 38%, which is slower than FY26, and an adjusted EBITDA loss of £17m to £20m, a small improvement.

Backlog and project quality

A stable contract backlog of £144m, with 83% of contracts profitable, shows the order book is not shrinking and that most contracts earn a margin. Compared with FY27 revenue guidance of £50m to £60m, the backlog is equal to about 2.4 to 2.9 years of revenue at that level, so the backlog covers more than the guidance alone.

Comparing the two business models

Selling equipment brings cash when systems are delivered but ties the company to winning new sales each year. A build-own-operate plant needs the company to fund construction, with income spread over ten years. The 150MW project is large relative to the company's current revenue, and building and owning it would use substantial capital, which is why project-level financing is being discussed with banks. Project finance usually places debt in a separate vehicle that is repaid from the plant's income, which can limit the effect on the parent's balance sheet.

Timeline

The joint front-end engineering design study comes first. A final investment decision is targeted for 2027, and production is expected in 2029. The period of about two years between decision and production suggests construction and commissioning time. Since the terms are non-binding, each of those steps depends on the study's results and on definitive agreements.

Electricity prices and project returns

The cost of power is the largest operating cost in making hydrogen through electrolysis. A project in which the customer supplies power, as in the refinery proposal, shifts that exposure away from the plant owner. Returns then depend on the price agreed for the hydrogen, the plant's availability and the cost of capital. The terms have not been disclosed, so the Economics cannot yet be estimated.

What comes next

LSE:ITM has called a general meeting for Friday 13 November 2026. Beyond that, progress on the FEED study, any definitive agreement with the refinery and confirmation of project financing are the milestones to watch, alongside half-year trading against the FY27 guidance.