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Research: Industrials
The memorandum of understanding (MOU) signed with Norwegian Hydrogen is the latest significant step in Provaris Energy’s development of a cost-effective green hydrogen (GH2) transportation solution for Europe. The first Norwegian commercial hydrogen export volumes are likely to become available around the time of Provaris’s H2Neo carrier’s maiden voyage in 2027, neatly linking with the European Union’s REPowerEU ambition to develop a hydrogen industry.
Provaris Energy |
European collaboration MOU signed |
Important announcement |
Industrial support services |
18 January 2023 |
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Provaris Energy is a research client of Edison Investment Research Limited |
The memorandum of understanding (MOU) signed with Norwegian Hydrogen is the latest significant step in Provaris Energy’s development of a cost-effective green hydrogen (GH2) transportation solution for Europe. The first Norwegian commercial hydrogen export volumes are likely to become available around the time of Provaris’s H2Neo carrier’s maiden voyage in 2027, neatly linking with the European Union’s REPowerEU ambition to develop a hydrogen industry.
Year end |
Revenue (A$m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
06/21 |
0.2 |
(3.1) |
(0.7) |
0.0 |
N/A |
N/A |
06/22 |
0.4 |
(6.8) |
(1.3) |
0.0 |
N/A |
N/A |
06/23e |
0.3 |
(9.7) |
(1.7) |
0.0 |
N/A |
N/A |
06/24e |
0.3 |
(10.2) |
(1.6) |
0.0 |
N/A |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Norwegian Hydrogen MOU speeds up development
Norwegian Hydrogen is a developer of GH2 projects with an industrial ownership base. Its aim is to develop GH2 production projects focused on the Nordics with a view to domestic supply and export. Norwegian Hydrogen’s foundation project, the Hellesylt Hydrogen Hub Pilot-E, is expected to be operational this year. The collaboration with Provaris will allow Norwegian Hydrogen to accelerate its plans to scale-up production volumes of compressed hydrogen from multiple sites in the Nordic region to deliver to major European import hubs.
Government/EU support for H2 gathers momentum
Norway has a well-established hydrogen strategy that should see plans to scale-up activity by 2030 aligning it with the European Union’s REPowerEU ambition to produce 10mtpa and import a further 10mtpa of hydrogen. Intergovernmental and EU support for the development of low emission hydrogen production and the development of hydrogen demand is gathering momentum, with numerous financial support packages available to participants. The timeline for the development of Provaris Energy’s H2Neo GH2 carrier is an obvious transport solution to link the Norwegian GH2 export volumes with hydrogen import hubs in the EU.
Valuation: Each new announcement adds credibility
The MOU with Norwegian Hydrogen is the latest positive announcement from Provaris in its development following the class ‘design approval’ for the H2Neo from the American Bureau of Shipping in December. The next key milestone would be the signing of an offtake agreement, which would add even greater confidence to the commercial viability of Provaris’s ambitious projects. Our modelling, which produces internal rates of return of 9.7–18.7% from a range of scenarios and vessel sizes, remains robust. We would revisit this in the event of an offtake agreement being announced. We consider this as being likely, given the exponential growth in demand for GH2 forecast by the International Energy Agency.
Support for hydrogen development is immense
Provaris Energy’s newly announced MOU with Norwegian Hydrogen is another step towards the development of a new GH2 transportation solution for Europe. The development of GH2 production in the Nordics and consumption in Europe is being supported by both heads of state and the EU, as well as numerous commercial organisations, and Provaris’s H2Neo GH2 carrier would appear to be a perfect solution in terms of design and the timing of its maiden voyage in 2027.
MOU signed with Norwegian Hydrogen accelerates plans
Norwegian Hydrogen is a developer of GH2 projects and has an industrial ownership base that includes a number of Norwegian industrial companies as well as Mitsui of Japan. Its aim is to develop GH2 production projects focused on the Nordics with a view to domestic supply and export. The MOU establishes a framework for the two organisations to undertake a concept design study (to be published in H123), which will review identified sites and select a preferred location for domestic and export volumes of hydrogen, as well as undertake a technical and economic review for the production and supply of compressed GH2 to nominated European ports using Provaris Energy’s H2Neo carrier.
Norwegian Hydrogen’s foundation project, the Hellesylt Hydrogen Hub Pilot-E, is expected to be operational this year. The collaboration with Provaris will allow Norwegian Hydrogen to accelerate its plans to scale-up volumes of compressed hydrogen from multiple production sites in the Nordic region to major European import hubs.
Agreement aligns with Norwegian and EU ambition
Norway has a well-established hydrogen strategy and is also home to nearly 50% of Europe’s hydropower reservoir capacity. Towards 2030, the Norwegian government plans to scale-up activity, aligning it with the EU’s REPowerEU ambition to produce 10mtpa and import a further 10mtpa of hydrogen. The timeline for the development of Provaris Energy’s H2Neo carrier is an obvious transport solution to link the Norwegian GH2 export volumes with the identified hydrogen import hubs in Germany and the Netherlands, see Exhibit 1 below.
Exhibit 1: Potential supply markets for Norwegian GH2 |
Source: Provaris Energy |
The H2Neo carrier can be demonstrated to be cost-effective over the relatively short sailing distances from Norway to Europe and the UK, when compared to alternative transportation modes.
To highlight the opportunity that exists, on 5 January 2023, the Norwegian and German governments announced a cooperation agreement to increase renewable energy and to develop green industry. The announcement included a joint declaration that includes partnership discussions on numerous subjects including: climate policy, hydrogen, renewable energy/offshore wind, negative emissions/carbon capture and storage, raw and processed materials and batteries, the maritime industry/green shipping and microelectronics.
On the back of the agreement mentioned above, Norwegian energy giant Equinor and German energy major RWE signed an agreement to work together to develop a large-scale value chain for low carbon hydrogen. This ambitious collaboration includes an aim to replace coal-fired power stations with hydrogen-ready gas-fired power plants in Germany and to build production of low-carbon and renewable hydrogen in Norway. Although the aim is to export the hydrogen via a pipeline, there are likely to be numerous opportunities for the use of Provaris Energy’s H2Neo vessels to link non-connected hydrogen production sites with either the pipeline or European ports.
The EU is clearly backing the development of initiatives to tackle climate change. Its key funding programme is the €95.5bn Horizon Europe initiative, which aims to support research and innovation into underpinning the United Nations’ Sustainable Development Goals and boosting the EU’s competitiveness and growth. There are also plans to develop a €3bn European Hydrogen Bank, which is designed to assist with the build out of hydrogen markets, and an Important Project of Common European Interest, called IPCEI Hy2Use, which is expected to be publicly funded with up to €5.2bn from 13 member states including Germany, the Netherlands and France. The project is expected to attract an additional €7bn of private investments.
Membership of NORWEP enhances opportunities
In addition to the MOU mentioned above, Provaris recently joined Norwegian Energy Partners (NORWEP), an organisation with more than 300 partners/members that collectively represent more than 90% of Norway’s exports. Its aim is to support and assist its members internationalise their collective technology and industry. Provaris is already working with a number of NORWEP partners and it will use NORWEP to identify additional suitable partners as well as options for landing compressed GH2 into the EU’s developing hydrogen infrastructure.
Exhibit 2: Financial summary
June year end |
A$m |
2020 |
2021 |
2022 |
2023e |
2024e |
|
INCOME STATEMENT |
|||||||
Revenue |
|
|
1.5 |
0.2 |
0.4 |
0.3 |
0.3 |
Profit Before Tax (norm) |
|
|
(2.9) |
(3.1) |
(6.8) |
(9.7) |
(10.2) |
Profit Before Tax (reported) |
|
|
(2.9) |
(3.1) |
(6.8) |
(9.7) |
(10.2) |
Reported tax |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Profit After Tax (norm) |
(2.9) |
(3.1) |
(6.8) |
(9.7) |
(10.2) |
||
Profit After Tax (reported) |
(2.9) |
(3.1) |
(6.8) |
(9.7) |
(10.2) |
||
Minority interests |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Net income (normalised) |
(2.9) |
(3.1) |
(6.8) |
(9.7) |
(10.2) |
||
Net income (reported) |
(2.9) |
(3.1) |
(6.8) |
(9.7) |
(10.2) |
||
Basic average number of shares outstanding (m) |
393.5 |
417.3 |
512.9 |
579.5 |
648 |
||
EPS - normalised (c) |
|
|
(0.7) |
(0.7) |
(1.3) |
(1.7) |
(1.57) |
Revenue growth (%) |
34.9 |
(84.0) |
53.4 |
(29.2) |
0.0 |
||
BALANCE SHEET |
|||||||
Fixed Assets |
|
|
6.3 |
5.8 |
5.4 |
5.0 |
4.6 |
Intangible Assets |
6.2 |
5.8 |
5.4 |
5.0 |
4.6 |
||
Tangible Assets |
0.1 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Investments & other |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Current Assets |
|
|
3.2 |
6.7 |
12.0 |
8.1 |
5.6 |
Stocks |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Debtors |
0.1 |
0.1 |
0.3 |
0.3 |
0.3 |
||
Cash & cash equivalents |
3.1 |
6.6 |
11.6 |
7.7 |
5.3 |
||
Other |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Current Liabilities |
|
|
(0.3) |
(0.2) |
(0.8) |
(0.8) |
(0.8) |
Creditors |
(0.2) |
(0.2) |
(0.8) |
(0.8) |
(0.8) |
||
Other |
(0.1) |
(0.0) |
(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 |
|
|
9.2 |
12.3 |
16.5 |
12.2 |
9.4 |
Minority interests |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Shareholders' equity |
|
|
9.2 |
12.3 |
16.5 |
12.2 |
9.4 |
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 |
0.0 |
||
Payments to suppliers and employees |
(2.9) |
(2.3) |
(3.1) |
(3.5) |
(3.8) |
||
Research and development |
(0.1) |
(0.0) |
0.0 |
(3.0) |
(3.0) |
||
Project development |
(1.0) |
(0.5) |
(1.9) |
(2.5) |
(2.8) |
||
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) |
1.0 |
||
Research and development tax concession rebate |
1.4 |
0.2 |
0.0 |
0.0 |
0.0 |
||
WA Renewable Hydrogen Fund grant |
0.0 |
0.0 |
0.1 |
0.3 |
0.3 |
||
Working capital |
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 |
|
|
(2.5) |
(2.6) |
(4.8) |
(8.8) |
(8.3) |
Capex |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Acquisitions/disposals |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Equity financing |
3.5 |
6.3 |
10.5 |
5.0 |
6.0 |
||
Dividends |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Other |
(0.3) |
(0.3) |
(0.7) |
(0.2) |
(0.2) |
||
Net Cash Flow |
0.7 |
3.4 |
5.1 |
(3.9) |
(2.4) |
||
Opening net debt/(cash) |
|
|
(2.4) |
(3.1) |
(6.6) |
(11.6) |
(7.7) |
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) |
|
|
(3.1) |
(6.6) |
(11.6) |
(7.7) |
(5.3) |
Source: Company accounts, Edison Investment Research
|
|
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