Provaris Energy — MOU with Total Eren is pivotal endorsement

Provaris Energy (ASX: PV1)

Currency in AUD

Last close As at 03/02/2023

AUD0.07

0.02 (40.00%)

Market capitalisation

AUD36m

Research: Industrials

Provaris Energy — MOU with Total Eren is pivotal endorsement

The memorandum of understanding (MOU) signed with energy heavyweight Total Eren gives real credibility to Provaris Energy’s compressed green hydrogen transportation solution and may also lead to funding options that make it a reality. The timing of the MOU is perfect as it comes at a time when the EU is introducing initiatives and investment to accelerate the introduction of green hydrogen into the energy mix, to improve energy reliability and push its zero-carbon agenda. Approval for construction of vessels could be the next key announcement that makes Provaris the genuine first mover in the space.

Andy Murphy

Written by

Andy Murphy

Director, Financials & Industrials

Industrials

Provaris Energy

MOU with Total Eren is pivotal endorsement

Project announcements

Industrial support services

20 September 2022

Price

A$0.06

Market cap

A$35m

A$1.4/US$

Net cash (A$m) at 30 June 2022

11.6

Shares in issue

548.3m

Free float

100%

Code

PV1

Primary exchange

ASX

Secondary exchange

FRA

Share price performance

%

1m

3m

12m

Abs

(34.4)

43.2

(22.2)

Rel (local)

(30.5)

37.3

(13.8)

52-week high/low

A$0.16

A$0.04

Business description

Provaris Energy is becoming a vertically integrated green hydrogen producer and supplier, combining production and compressed hydrogen shipping solutions for transporting energy from Australia to regional markets in South-East Asia and Europe.

Next events

Interim results

February 2023

Analyst

Andy Murphy

+44 (0)20 3077 5700

Provaris Energy is a research client of Edison Investment Research Limited

The memorandum of understanding (MOU) signed with energy heavyweight Total Eren gives real credibility to Provaris Energy’s compressed green hydrogen transportation solution and may also lead to funding options that make it a reality. The timing of the MOU is perfect as it comes at a time when the EU is introducing initiatives and investment to accelerate the introduction of green hydrogen into the energy mix, to improve energy reliability and push its zero-carbon agenda. Approval for construction of vessels could be the next key announcement that makes Provaris the genuine first mover in the space.

Year end

Revenue (A$m)

PBT*
(A$m)

EPS*
(c)

DPS
(c)

P/E
(x)

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.

Credibility of compression solution underpinned

On 15 September, Provaris Energy announced the signing of a new MOU with Total Eren, a France-based renewable energy independent power producer (IPP). The agreement will see the two parties co-operate on the development of solutions to transport green hydrogen (H2) to Asia and Europe utilising Provaris Energy’s compressed H2 and transport solution. Specifically, the agreement will identify and assess opportunities for the importation of green H2 into Europe and Asia utilising Provaris’s GH2 Carriers. The two entities have already identified project opportunities, and terms and participation will be agreed in future. This is likely to include funding arrangements.

EU is building the mechanism to drive H2 adoption

Provaris’s initial H2 projects are in Australia, but this MOU brings the possibility that H2 projects being developed to supply Europe will become a reality sooner rather than later. The war in the Ukraine has pushed the EU to reduce reliance on Russian gas via its REPowerEU plan and the announcement of the creation of a European Hydrogen Bank, with access to a €3bn budget to guarantee the purchase of H2, will help underpin proposed clean H2 projects, such as Total Eren’s project in Morocco, that can then feed clean H2 via major import hubs like Rotterdam, and into the European Hydrogen Backbone network. Further assistance in the development of a clean H2 market came when the EU voted to loosen the ‘additionality’ rules and passed binding targets for renewable H2.

Valuation: MOU confirms credibility

This MOU confirms credibility and lends support to our modelling, which produced internal rates of return (IRR) of 9.7–18.7% from a range of scenarios and vessel sizes. Our assumptions remain relevant and are unchanged. Successful offtake discussions would be an opportunity to revisit our IRR assumptions, and are likely given the exponential growth in demand for green hydrogen forecast by the IEA.

Next milestone likely to be vessel class approvals

The increased credibility attached to Provaris’s H2 transport solution by this MOU is clearly very important. The next important step is likely to be a Class Approval from the American Bureau of Shipping (ABS), in the shape of an Approval for Construction for the novel H2Neo vessel. It is hoped that this authority will be forthcoming before the end of 2022, which would allow Provaris to engage in detailed discussions with shipyards that will initially focus on constructability and price with a view to first voyages in early 2027. These are likely to coincide with the first green H2 volumes from the numerous clean energy plants being planned. Some of these projects and trade routes are highlighted in the chart below.

Exhibit 1: Summary of Provaris Energy’s existing projects and areas of potential expansion

Source: Provaris Energy

We have updated our estimates following the release of FY22 results. The company ended the year with a comfortable net cash position of A$11.6m.


Exhibit 2: Financial summary

A$m

2020

2021

2022

2023e

2024e

June year end

IFRS

IFRS

IFRS

IFRS

IFRS

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


General disclaimer and copyright

This report has been commissioned by Provaris Energy and prepared and issued by Edison, in consideration of a fee payable by Provaris Energy. Edison Investment Research standard fees are £60,000 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 2022 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 Provaris Energy and prepared and issued by Edison, in consideration of a fee payable by Provaris Energy. Edison Investment Research standard fees are £60,000 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 2022 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

More on Provaris Energy

View All

Latest from the Industrials sector

View All Industrials content

Research: TMT

Esker — Better profitability in FY22

Esker reported a robust H122 performance, with 19% revenue growth year-on-year, 41% operating profit growth and 19% growth in the annual recurring value of new contracts signed. Reflecting the potential for slowing demand due to current macroeconomic uncertainty, the company slightly reduced its revenue guidance for FY22 but expects to be at the upper end of its operating margin target range. We reduce our cost forecasts for FY22/23 and revenue forecast by 1% in FY23, driving a 16% EPS upgrade in FY22 and a 9% downgrade in FY23.

Continue Reading

Subscribe to Edison

Get access to the very latest content matched to your personal investment style.

Sign up for free