offshore rig in twilight

MOU signed with HyEnergy Project partners

Global Energy Ventures 23 August 2021 Update
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Global Energy Ventures

MOU signed with HyEnergy Project partners

Signing of MOU

Industrial support services

23 August 2021

Price

A$0.08

Market cap

A$35m

Estimated net cash (A$m) at 30 June 2021

6.5

Shares in issue

452.1m

Free float

100%

Code

GEV

Primary exchange

ASX

Secondary exchange

FRA

Share price performance

%

1m

3m

12m

Abs

13.8

(9.8)

48.0

Rel (local)

10.9

(15.3)

20.2

52-week high/low

A$0.14

A$0.04

Business description

Global Energy Ventures is focused on the delivery of integrated compressed gas shipping solutions for transporting energy to regional markets. Although the primary focus is on compressed natural gas, large-scale compressed hydrogen solutions are likely to become the dominant focus of the group.

Next events

Quarterly activities

October 2021

Analysts

Andy Murphy

+44 (0)20 3077 5700

Ian McLelland

+44 (0)20 3077 5756

Dan Gardiner

+44 (0)20 3077 5700

Elaine Reynolds

+44 (0)20 3077 5713

Global Energy Ventures is a research client of Edison Investment Research Limited

The memorandum of understanding (MOU) recently signed between GEV and the HyEnergy Project partners will potentially confirm the validity of GEV’s own scoping study. The study highlighted the cost advantage of compressed hydrogen shipping, the technical feasibility of GEV’s compressed solution and confirmed the potential production costs of green hydrogen in Western Australia. If HyEnergy’s own scoping study concludes with a positive outcome, it could prove to be the catalyst that genuinely kick-starts GEV’s compressed hydrogen transportation solution. We maintain our existing financial forecasts.

Year end

Revenue (A$m)

PBT*
(A$m)

EPS*
(c)

DPS
(c)

P/E
(x)

Yield
(%)

06/19

1.1

(8.9)

(2.6)

0.0

N/A

N/A

06/20

1.5

(2.9)

(0.8)

0.0

N/A

N/A

06/21e

0.1

(4.1)

(1.0)

0.0

N/A

N/A

06/22e

0.0

(6.4)

(1.3)

0.0

N/A

N/A

Note: *PBT and EPS are on a reported basis.

MOU could be a key endorsement to GEV’s CH2 ship

Under the terms of the MoU, GEV will undertake a feasibility study to evaluate the technical and commercial feasibility of exporting green hydrogen from the HyEnergy Project. The scope includes transport from the onshore hydrogen gas production facility to an offshore ship-loading buoy and then on to nominated Asia-Pacific markets utilising GEV’s compressed hydrogen shipping solution. If successful, it could open the door to commercialising clean compressed hydrogen shipping from Australia to South-East Asia and similar operations in Europe, giving GEV first mover advantage. GEV’s operations are described in detail in our 23 July initiation note.

Market opportunity: Renewable energy imbalance

Australia is blessed with plentiful renewable energy sources (wind and solar) and relatively limited local demand given the population. By contrast, several countries in South-East Asia have pledged to decarbonise their economies but have challenges in achieving targets given the geographies. GEV is looking to address this imbalance by transporting surplus energy in the form of green hydrogen from northern and western Australia to areas of high demand in its novel compressed hydrogen vessels. We discuss the opportunities and options for shipping green hydrogen in our 28 July note.

Valuation: NPV calculation implies attractive IRRs

Our original modelling suggested potentially attractive IRRs from a range of scenarios which fit with this potential project in terms of the location, scale of production and timing, being around 2026 for first shipments. The cost of the study is expected to fall within existing forecasts, which already include expected fund-raises to develop both the vessels and to finance studies such as this one. There are, however, considerable risks to achieving the expected returns including funding, hydrogen availability, hydrogen pricing, the fact that the hydrogen market is at an early stage of development and that the vessel design is novel.

Significant potential milestone announcement

The MOU signed between GEV and the partners to the HyEnergy Project in August will potentially confirm the validity of GEV’s own scoping study which highlighted the cost advantage of compressed hydrogen shipping, the technical feasibility of GEV’s compressed solution and confirmed the potential production costs of green hydrogen in Western Australia. If HyEnergy’s own scoping study concludes with a positive outcome, it could prove to be the catalyst that genuinely kick-starts GEV’s compressed hydrogen transportation solution. While the HyEnergy Project is important, GEV remains engaged with other hydrogen export projects in Australia, as well as different groups in other regions, notably in Europe.

GEV’s MOU with the HyEnergy Project

Following the publication of GEV’s own scoping study (published in March 2021) to establish the cost advantage of shipping compressed hydrogen, versus either liquified hydrogen, or hydrogen in the form of ammonia over long distances from Australia, the company has entered into a MOU with the partners of the HyEnergy Project, Province Resources and Total Eren, to undertake a feasibility study looking at the export of green Hydrogen.

The feasibility study, to be carried out by GEV over the next six to 12 months, will evaluate the technical and commercial aspects of exporting green hydrogen from the HyEnergy Project, in the Gascoyne region of Western Australia. The study will include the transportation of hydrogen from the onshore production facility to an offshore loading buoy and the onward transportation of the hydrogen to nominated Asia-Pacific markets in compressed form utilising GEV’s patented compressed hydrogen shipping solution. These destinations could include potential major markets in South Korea, Japan, Indonesia and Singapore.

The purpose of the study is to provide the HyEnergy Partners with sufficient confidence to justify selecting GEV’s compressed shipping solution as a preferred export method in the next phase of project engineering.

The MOU is non-binding and non-exclusive and expires on 31 December 2022. More details of the HyEnergy Project are expected to be released in the next month or so when it publishes its own scoping study. However, a conclusion is expected in Q2/Q3 2022.

The HyEnergy Project

The HyEnergy Project is a potential ‘renewable green hydrogen project’ located in the Gascoyne region of Western Australia, owned 100% by Total Eren. The region has a flat arid landscape that extends for more than 200km from north to south either side of the town of Carnavon, stretched along the coast, see Exhibit 1. The area is particularly attractive for renewable energy for a number of reasons including;

1.

Being ranked 4th in the ‘Bonzle Digital Atlas of Australia’ for the highest mean wind speeds in Western Australia.

2.

High levels of solar resources. It averages 211 sunny days per annum with an average solar exposure of 22MJ/m2/day (or 6.24kWh/m2/day) according to Carnavon, A case study of increasing levels of PV penetration in an isolated electricity Supply System (April 2012).

3.

A plentiful supply of sea water for the electrolyser plant.

4.

Coastal assess for a potential offshore ship-loading facility for export.

5.

Relatively close proximity to the Dampier Bunbury Natural Gas Pipeline (DPNGP), which could allow hydrogen feedstock to be introduced to the network for domestic or export purposes.

6.

Availability of geothermal power options to generate renewable electricity.

Exhibit 1: Location of the HyEnergy Project

Source: Province Resources

The HyEnergy Project is expected to develop 8GW of renewable energy from wind and solar by 2030, with a corresponding green hydrogen facility with the capacity to produce up to 200,000tpa of hydrogen. This will also include a Phase 1 of up to 1GW which is expected to demonstrate commercial scale for the complete 8GW project. The HyEnergy scoping study will assess the required capital expenditure, operating expenditure, required permitting as well as potential domestic and overseas markets for hydrogen and is expected to be completed in 2021.

Exhibit 2: Summary of the structure of the HyEnergy Project

Source: Province Resources

Total Eren, a subsidiary of the EREN Groupe, is an operator of renewable power plants that include solar, wind and hydro, which produced 3.6GW of power in 2020. It will fund, build, own and operate the upstream renewable energy generating facility. It has already commissioned a 256MW solar farm in Victoria, which has attracted funding from the Australian government’s own $10bn Clean Energy Finance Corporation (CEFC) among others.

However, a 50/50 JV consisting of Total Eren and ASX-listed Province Resources will jointly fund, build, own and operate all of the downstream hydrogen production and distribution infrastructure. Although the current expectation is that the HyEnergy Project will be in full production by 2030, the company believes that the first phase is likely to coincide with the development timeframe of GEV’s 430t pilot vessel programme, which is set to be around 2026.

The HyEnergy Project described here is similar in concept to the 26GW Asian Renewable Energy Hub also located in Western Australia and discussed in our Initiation note (published on 23 July 2021) and in a wider note covering the outlook for hydrogen.

Exhibit 3: Financial summary

A$m

2019e

2020e

2021e

2022e

2023e

Year end June

IFRS

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

 

1.1

1.5

0.1

0.0

0.0

Profit Before Tax (reported)

 

 

(8.9)

(2.9)

(4.1)

(6.4)

(7.4)

Reported tax

0.0

0.0

0.0

0.0

0.0

Profit After Tax (reported)

(8.9)

(2.9)

(4.1)

(6.4)

(7.4)

Net income (reported)

(8.9)

(2.9)

(4.1)

(6.4)

(7.4)

Basic average number of shares outstanding (m)

339.2

382.1

419.4

487.8

559.3

EPS – Reported (c)

(2.6)

(0.8)

(1.0)

(1.3)

(1.3)

BALANCE SHEET

Fixed Assets

 

 

6.3

6.3

5.9

5.5

5.0

Intangible Assets

6.2

6.2

5.8

5.4

5.0

Tangible Assets

0.0

0.1

0.1

0.1

0.1

Investments & other

0.0

0.0

0.0

0.0

0.0

Current Assets

 

 

2.4

3.2

6.6

5.9

4.3

Stocks

0.0

0.0

0.0

0.0

0.0

Debtors

0.0

0.1

0.1

0.1

0.1

Cash & cash equivalents

2.4

3.1

6.5

5.9

4.2

Other

0.0

0.0

0.0

0.0

0.0

Current Liabilities

 

 

(0.1)

(0.3)

(0.3)

(0.3)

(0.3)

Creditors

(0.1)

(0.2)

(0.2)

(0.2)

(0.2)

Tax and social security

0.0

0.0

0.0

0.0

0.0

Short term borrowings

0.0

0.0

0.0

0.0

0.0

Other

(0.0)

(0.1)

(0.1)

(0.1)

(0.1)

Long Term Liabilities

 

 

0.0

0.0

0.0

0.0

0.0

Long term borrowings

0.0

0.0

0.0

0.0

0.0

Other long term liabilities

0.0

0.0

0.0

0.0

0.0

Net Assets

 

 

8.6

9.2

12.2

11.1

9.0

Minority interests

0.0

0.0

0.0

0.0

0.0

Shareholders' equity

 

 

8.6

9.2

12.2

11.1

9.0

CASH FLOW

Op Cash Flow before WC and tax

0.0

0.0

0.0

0.0

0.0

Receipts from the ATO (Covid-19 cash boost)

-

0.1

0.1

0.0

0.0

Payments to suppliers and employees

(2.9)

(2.9)

(2.0)

(2.5)

(2.5)

Research and development

(3.2)

(0.1)

(0.1)

(2.0)

(3.0)

Project development

(2.3)

(1.0)

(1.0)

(1.0)

(1.0)

Interest received

0.0

0.0

0.0

0.0

0.0

Interest paid for lease liabilities

-

(0.0)

(0.0)

(0.0)

(0.0)

Research and development tax concession rebate

1.0

1.4

0.5

0.0

0.0

Working capital

0.0

0.0

0.0

0.0

0.0

Exceptional & other

0.0

0.0

0.0

0.0

0.0

Tax

0.0

0.0

0.0

0.0

0.0

Net operating cash flow

 

 

(7.4)

(2.5)

(2.6)

(5.5)

(6.5)

Capex

0.0

0.0

0.0

0.0

0.0

Acquisitions/disposals

0.0

0.0

0.0

0.0

0.0

Net interest

0.0

0.0

0.0

0.0

0.0

Equity financing

4.8

3.5

6.3

5.0

5.0

Dividends

0.0

0.0

0.0

0.0

0.0

Other

(0.4)

(0.3)

(0.4)

(0.2)

(0.2)

Net Cash Flow

(3.0)

0.7

3.4

(0.7)

(1.7)

Opening net debt/(cash)

 

 

(5.4)

(2.4)

(3.1)

(6.5)

(5.8)

FX

0.0

0.0

0.0

0.0

0.0

Other non-cash movements

0.0

0.0

0.0

0.0

0.0

Closing net debt/(cash)

 

 

(2.4)

(3.1)

(6.5)

(5.8)

(4.2)

Source: GEV accounts, Edison Investment Research


General disclaimer and copyright

This report has been commissioned by Global Energy Ventures and prepared and issued by Edison, in consideration of a fee payable by Global Energy Ventures. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2021 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Global Energy Ventures and prepared and issued by Edison, in consideration of a fee payable by Global Energy Ventures. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2021 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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