BluView: Investors bullish on hydrogen sector plus stocks worth watching
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Each week boutique corporate advisory firm EverBlu Capital explores different sectors and trends, along with which companies Stockhead readers should put on their watch list.
As world leaders continue high-stakes talks at the COP26 climate summit in Glasgow, hydrogen is being earmarked as the fuel of hope for decarbonising the global economy.
With the shift to net zero emissions and renewable fuels picking up urgency investors are bullish on the sector and its future opportunities for solid returns.
Australian boutique corporate advisory firm EverBlu has hydrogen high on its list for investors, particularly those focusing on Environmental, Social and Governance (ESG) criteria as a set of standards for consideration in their investment decisions.
While business magnates like Tesla’s Elon Musk are counting on lithium-ion battery technology to carry the world out of the fossil fuel age, others like Amazon founder Jeff Bezos have their money on hydrogen.
Whether lithium or hydrogen fuels tomorrow’s cars remains a robust dinner time debate, but either way, EverBlu’s Capital Markets director John Rawicki said there is a huge market for both, and hydrogen presents a solid investment opportunity.
“There’s a lot of support for the hydrogen sector and a push at all levels of government and private enterprise toward green energy and net zero emissions,” he said.
“We’re seeing that not only in Australia but everywhere around the world including in developing and emerging economies.”
At home, the potential for the Hunter Valley Region in New South Wales to be a leader of Australia’s clean hydrogen industry continues to grow.
The Federal Government through the Australian Renewable Energy Agency (ARENA) has pledged an extra $1.5m to conduct a $3m feasibility study on potential of a hydrogen hub at the Port of Newcastle.
Macquarie Group, Snowy Hydro and Chinese-controlled pipeline owner Jemena are among project partners to be involved in conducting the feasibility study.
“The Port of Newcastle Hydrogen Hub would have the capacity to generate one gigawatt by 2030,” Rawicki said.
“Macquarie CEO Shemara Wikramanayake has been a vocal advocate for Australia to capitalise on its natural advantages in abundant wind and solar resources and seize the opportunity in green hydrogen, which is expected to become a major globally traded commodity.”
The Federal Government is investing more than $1.2 billion to accelerate the development of an Australian hydrogen industry. There are plans for up to seven clean hydrogen investment hubs in regional Australia.
Rawicki said the aim is to get the production of green hydrogen to below $2kg in which case it would become far more competitive with more traditional fuels for transport.
“Producing clean hydrogen under $2kg is a priority under the Federal Government’s Technology Investment Roadmap, part of the long-term plan to reach net zero by 2050,” he said.
“At the moment cost is a big barrier but as more projects come online the costs will come down and we will see more penetration by hydrogen of the energy market.”
Rawicki said while there has been much discussion about the 3 main types of hydrogen (grey, blue and green) and which has the brightest future, from an investor’s perspective it is early in the game and ultimately economics will determine value and drive project development.
“Whether it’s blue or green hydrogen, both are aligned with ESG policies and there is money to be made all along the spectrum,” he said.
“There are benefits with each type and we might see slightly different applications or uses but at the end of the day it’s all helping achieve the goal of producing a more environmentally sustainable fuel source.”
Rawicki has flagged several hydrogen stocks for investors to put on their watch list. His standout was TNG Limited (ASX:TNG) which recently raised $12.5 million in an oversubscribed share placement at 9 cents per share.
EverBlu Co-Managed the raise with Canaccord, which was strongly supported by several new institutional and high net worth investors, as well as the company’s German-based major shareholder, Deutsche Balaton.
TNG is advancing vanadium and green hydrogen opportunities in Australia. The company has a joint venture with Malaysian energy company AGV Energy to progress green hydrogen production projects in Australia using AGV’s HySustain technology.
“The Initial HySustain project in Darwin is progressing through a scoping and evaluation phase,” Rawicki said.
“The joint venture is progressing several expressions of interest from leading Asian energy groups for green hydrogen off-take for the Darwin project.”
Second on Rawicki’s list of hydrogen stocks to watch is Hexagon Energy Materials (ASX:HXG) which is developing a business to deliver zero emission blue hydrogen into export and domestic markets.
Hexagon is undertaking a pre-feasilibity study (PFS) on utilising gasification and carbon capture and storage (CCS) and progressively increasing renewables inputs to minimise environmental impacts in hydrogen that is produced.
PFS work for the Pedirka Blue Hydrogen Project in the Northern Territory is well underway with further announcements to be made in the coming weeks.
“The Northern Territory is an ideal export hub for the Asian market,” said Rawicki.
“Blue hydrogen will provide the gateway for the conversion to hydrogen economies over the coming decades.”
“With a low market cap of only $50m here, we see plenty of share price upside to be unlocked as HXG progresses through the PFS stage, approvals and into development”
At number three on Rawicki’s list is QEM Limited (ASX:QEM), which earlier this year announced it commenced studies into green hydrogen opportunities at its flagship Julia Creek vanadium and oil shale project in North Queensland.
The company plans to initially use its hydrogen to support the energy needs of other resources projects located in the North West Minerals Province of Queensland, considered one of the world’s richest mineral producing regions.
Rawicki said QEM’s move into green hydrogen is well timed with the Queensland Government appointing Australia’s first dedicated minister for hydrogen in 2020.
“The Queensland Government has stated it expects hydrogen to play a key role in both the local economy and as a major new export opportunity for the state,” he said.
“The Julia Creek project is conveniently located in the North West Minerals Province in Queensland and is positioned in a transport nexus as road trains and trucks travelling along the Flinders Highway to Townsville typically need to refuel in the Julia Creek area.
“This presents additional local opportunities to QEM in the longer term if the proliferation of hydrogen-powered vehicles emerges.”
Rawicki’s final hydrogen company for investors to watch is Lion Energy (ASX:LIO). Traditionally Lion has been focused on conventional oil and gas production but in April this year the company announced a move into the green hydrogen space.
“The company is initially focused on developing low capital intensive and shorter lead time opportunities for refuelling infrastructure for buses and trucks,” Rawicki said.
“Lion’s objective is to deliver green hydrogen at the pump at a price close to diesel price parity by building a network of modular hydrogen production and refuelling stations across Australia, starting with Queensland.”
In September, Lion announced it had signed an MoU with BLK Auto, a specialist vehicle importer and distributor, for a collaboration to assess opportunities to grow Australia’s hydrogen transport and infrastructure capabilities.
Investors have responded to the move with Lion’s stock price jumping from 4c to 10c in the past two months.
The views, information, or opinions expressed in the interview in this article are solely those of the interviewee and do not represent the views of Stockhead.
Stockhead has not provided, endorsed or otherwise assumed responsibility for any financial product advice contained in this article.