Biomass, green hydrogen are tasty lures for Sweetman Renewables

Sweetman Renewables is targeting the biomass and green hydrogen sectors with a $4m pre-IPO capital raising ahead of its ASX debut later this year.

However, unlike most proposed new entrants to the ASX, the company has a massive advantage in the form of a profitable 100 year-old sawmill business that has long-term offtake contracts with the Forestry Corporation of New South Wales.

It is this same timber business, which has been enjoying unprecedented demand, that Sweetman is looking to leverage into becoming a significant renewable energy player.

Here’s how it intends to achieve this.

Timber operations generate wood waste that is normally sent to landfills due to their unsuitability for any other uses. That’s a lot of wood given that it makes up 13% of the materials that become landfill.

However, this wood waste can be used as biomass to generate electricity, an industry that was already worth US$50bn in 2020 and is increasingly seen as a viable alternative to coal.

Sweet, sweet renewable energy

To sweeten the pot further, the International Energy Agency considers sustainable biomass to be a form of renewable energy.

It notes that as long as biomass harvests do not exceed carbon uptake in the forest, it does not increase atmospheric carbon dioxide concentrations.

The energy agency added that as such, the use of biomass from managed forestry products will help avoid fossil carbon emissions by replacing fossil fuels.

Other bodies such as Climate Works Australia agree that the transition to net-zero requires the use of renewable energy sources, including sustainable biomass, which incidentally is capable of producing baseload power where solar and wind are unable to do so.

Contracts lined up

As such, Sweetman is looking to leverage on its sustainable biomass to produce green hydrogen, which has been forecast by Goldman Sachs to become a US$10 trillion market by 2050.

This potential has already been recognised with the company recently signing a 20-year, US$90m biomass supply contract with a Japanese conglomerate.

It is also in advanced negotiations with Verdant Earth Technologies to be the primary supplier to Verdant’s $550m biomass power station in the Hunter Valley.

The pre-IPO raise will be led by Barclay Pearce Capital, which completed successful pre-IPO capital raises for Verdant Earth Technologies and Infinite Blue Energy.

This article was developed in collaboration with Sweetman Renewables, a Stockhead advertiser at the time of publishing.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.