Provaris Energy — Studies confirm viability of both hydrogen projects

Provaris Energy (ASX: PV1)

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Research: Industrials

Provaris Energy — Studies confirm viability of both hydrogen projects

The recent announcement of the successful conclusions of two studies into numerous aspects of the Tiwi H2 and the HyEnergy projects, both in Australia, is another step along the road to Provaris Energy becoming the world’s first truly green, vertically integrated producer and supplier of compressed hydrogen at scale. The market opportunity for green hydrogen is substantial, with the International Energy Agency (IEA) forecasting that demand for green hydrogen will increase from almost zero in 2020 to c 81Mt by 2030.

Andy Murphy

Written by

Andy Murphy

Director, Financials & Industrials

Industrials

Provaris Energy

Studies confirm viability of both hydrogen projects

Project announcements

Industrial support services

30 August 2022

Price

A$0.08

Market cap

A$44m

A$1.4/US$

Estimated net cash (A$m) at 30 June 2022

12.7

Shares in issue

548.3m

Free float

100%

Code

PV1

Primary exchange

ASX

Secondary exchange

FRA

Share price performance

%

1m

3m

12m

Abs

51.0

4.1

10.0

Rel (local)

45.1

5.5

17.8

52-week high/low

0.16

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

Preliminaries

August 2022

Interims

February 2023

Analysts

Andy Murphy

+44 (0)20 3077 5700

James Magness

+44 (0)20 3077 5756

Provaris Energy is a research client of Edison Investment Research Limited

The recent announcement of the successful conclusions of two studies into numerous aspects of the Tiwi H2 and the HyEnergy projects, both in Australia, is another step along the road to Provaris Energy becoming the world’s first truly green, vertically integrated producer and supplier of compressed hydrogen at scale. The market opportunity for green hydrogen is substantial, with the International Energy Agency (IEA) forecasting that demand for green hydrogen will increase from almost zero in 2020 to c 81Mt by 2030.

Year end

Revenue (A$m)

PBT*
(A$m)

EPS*
(c)

DPS
(c)

P/E
(x)

Yield
(%)

06/20

1.5

(2.9)

(0.7)

0.0

N/A

N/A

06/21

0.2

(3.1)

(0.7)

0.0

N/A

N/A

06/22e

0.0

(6.4)

(1.3)

0.0

N/A

N/A

06/23e

0.0

(7.4)

(1.3)

0.0

N/A

N/A

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

Tiwi H2 project completes concept design study

On 2 August, Provaris Energy announced the completion of the concept design study for its proposed Tiwi H2 project on the Tiwi Islands, located off the north coast of Australia. The project is targeting the production and export of 100,000 tonnes of green H2, beginning in 2027. The positive completion of the study establishes a clear roadmap to progress the project to pre-front end engineering and design (pre-FEED) and front-end engineering and design (FEED) level technical, commercial and economic studies, as well as the consideration of potential financing options. The study underpins the observations and outcomes of Provaris’s 2021 compressed hydrogen chain scoping study. The award of major project status (MPS) by the Northern Territory (NT) Government is a significant step forward.

HyEnergy export project study underpins feasibility

In August 2021, Provaris Energy entered into a non-binding memorandum of understanding with Province Resources (ASX:PRL) and Total Eren to support a technical and commercial feasibility study relating to the export of c 200,000tpa of green hydrogen from the Gascoyne Region of Australia to nominated Asian markets. Provaris has shared the draft study report with the Western Australia (WA) Government and the HyEnergy project proponents for review. It will announce the final outcomes, which it expects to be favourable, in H222.

Project progress confirms initial IRR modelling

Progress made at the Tiwi H2 project confirms capital cost estimates and our modelling, which produced internal rates of return (IRRs) of 9.7–18.7% from a range of scenarios and vessel sizes. Our assumptions remain relevant and are unchanged despite the slippage by 12 months into 2027. 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. It expects that demand for green hydrogen globally could grow from almost zero to 81Mt by 2030.

Significant progress achieved at both projects

In addition to developing its novel compressed hydrogen vessels, Provaris has been advancing various studies relating to its solar energy and green hydrogen production project in the Tiwi Islands, as well as the HyEnergy export project in Western Australia. In August 2022, Provaris confirmed the successful completion of the concept design study on the former and a technical and commercial feasibility study (called the HyExport study) on the latter. Both studies will allow Provaris to push ahead with the next stages of the projects, with the Tiwi H2 and HyEnergy projects targeting production in 2027 and 2029 respectively.

Tiwi H2 project completes concept design study

On 2 August, Provaris announced the completion of the concept design study for its proposed Tiwi H2 project on the Tiwi Islands, located off the north coast of Australia. The project is targeting the production and export of 100,000 tonnes of green H2, beginning in 2027. The positive completion of the study establishes a clear roadmap to progress the project to pre-FEED and FEED-level technical, commercial and economic studies, as well as the consideration of potential financing options. The study underpinned numerous observations and outcomes of Provaris’s 2021 compressed hydrogen chain scoping study. The award of MPS by the NT Government is a significant step forward.

Scope of the concept design study encompassed all major aspects

The Tiwi H2 project is physically large, with the solar farm covering an area of 2,600 hectares and the transmission line linking the solar farm to the H2 production and export area spanning 30km. The study therefore has subdivided the five key activities into ‘precincts’. These separate precincts were also outlined in the project’s Northern Territory Environmental Protection Agency submission, filed at the end of June, and consisted of the following elements:

Solar Precinct: solar farm of sufficient size to produce 100,000tpa of green hydrogen, plus a battery storage system and a step-up substation. To be located on existing poorly performing plantation land.

High-voltage transmission line: a 30km, dual-circuit, 275kV line to be installed adjacent to an existing road to link the Solar Precinct to the H2 Production Precinct.

H2 Production Precinct: to include a step-down substation, the electrolyser facilities and potentially additional battery storage capacity.

H2 Export Precinct: to include a desalination plant to supply demineralised salt water to the electrolyser facilities, hydrogen compression and loading facilities for the H2Neo carrier vessels.

H2 shipping: a fleet of novel H2Neo carriers with capacity of 26,000m3 to transport H2 to Asia-Pacific energy markets. An H2 import terminal, which included an unloading berth and other required facilities, was also included.

The study base case assessed the development of a fleet of H2Neo vessels supplying a hydrogen market in Singapore, some 1,800 nautical miles from Port Melville on the Tiwi Islands.

Exhibit 1: Outline of the proposed Tiwi H2 project

Source: Provaris Energy

Concept design study outcomes confirm earlier observations

The study reinforces many of the observations and modelled outcomes of the compressed hydrogen chain scoping study undertaken by Provaris and published in 2021. The latest study underpins the technical feasibility of the Tiwi H2 project and therefore supports its ongoing progression towards the production, compression and exportation of green hydrogen from 2027.

The 10 key outcomes from the study are as follows:

Solar intensity on the site is competitive: using industry-standard PVsyst software, the proposed Solar Precinct on Melville Island is a competitive solar resource location for the production of hydrogen.

Load-following capability reduces the need for additional battery and hydrogen storage: Provaris’s compressed hydrogen supply chain enables a near-perfect ability to load-follow variable power generation, reducing the need for additional storage, thus lowering capital costs versus alternative transport methods.

Degradation of solar and electrolyser efficiency built into costs: over the 30-year life of the project, Provaris expects that additional solar farm capacity will be required to offset panel degradation, as well as renewal of the electrolyser stacks. The space required is available on site and the costs are included in the analysis.

Electrolyser utilisation was optimised at around 40%: analysis showed that to increase electrolyser utilisation above 40% increased the levelized cost of hydrogen (LCOH) due to the requirement for and related costs of additional battery storage facilities.

Compression required 1.0kWh per kg of H2: Provaris commissioned an external report that suggested the energy required to compress H2 from 20 bar to 250 bar is 1.0kWh/kg loaded, the equivalent of a loss of hydrogen of just 0.2%.

Proximity to markets benefits delivered cost: the delivered LCOH is sensitive to distance to market and the northerly location of the Tiwi Islands minimises this cost in respect of a range of South-East Asian markets. The majority of hydrogen export locations in Australia are in the west, east or south of the country, giving Provaris a distinct advantage as the Tiwi Islands are off the north coast and therefore somewhat closer to potential markets than other exporting locations.

Desalination had a minor impact on the LCOH: external reports confirm that the costs of desalination, including capital expenditure, operating expenditure and energy, were less than 1% of the LCOH. Energy use was only 0.1kWh/kg, ie a 0.2% loss in hydrogen for export.

Compression facilities require less than two hectares of space: compression facilities of a size suitable to load an H2Neo vessel in 12 hours are assessed to be less than two hectares (c five acres).

Existing port facilities and land availability save time and capital: the Port Melville facilities have been reviewed and the study concluded that the current infrastructure is suitable for Provaris Energy’s H2Neo carriers. Additional land for the Solar Precinct remains available, subject to the completion of negotiations with the Munupi Clan Landowners.

Approximately 60% of capital costs are non-compression related: this includes the solar farm, batteries, power transmission and electrolysers. The remaining 40% of costs relate to the H2Neo vessels (c 30%), and compression and loading (10%), including capex, opex and fuel.

Project capital cost estimates consistent with our analysis

With the help of supplied external estimates and studies, Provaris has concluded that the total project capital cost will be in the range of US$4.5–5.2bn for capacity of 100,000tpa of hydrogen export volumes, from early 2027. The upper range being the current cost estimate of all capital equipment. The company believes that the accuracy range of estimates is ±30% and that the figures exclude all grant funding or subsidies that may be available. We believe these figures are consistent with our original estimates of the cost of a fleet of vessels, which we discussed in our initiation note.

Exhibit 2 below details the levelized cost of hydrogen delivered to Singapore including ship capex, operational and maintenance costs, port fees and fuel. Other key assumptions in the calculation of the LCOH include a 30-year project life, a discount rate of 5%, inflation of 2% pa in operational costs and development over two phases of 50,000tpa of hydrogen from 2027.

It should be noted here that the cost of developing this project is vast when compared to Provaris’s market capitalisation. The company will therefore commence a process to seek interested partners in the areas of investment, offtake, construction and operational support, especially in the upstream components that include solar generation, transmission and electrolysis.

Exhibit 2: LCOH breakdown – delivered to Singapore

Source: Provaris Energy

Commercial risks offset by carbon reduction momentum

This project is clearly not without risks, but we believe these risks are well understood and that the energy and shipping industries are making progress to address them. We believe that Provaris is well placed to minimise and/or avoid the risks which are numerous and include:

1.

Missing out on the equipment cost reduction curve, which will inevitably happen as the industry scales up.

2.

Failing to secure required approvals and permissions from the Munupi Landowners, the NT Government and/or the federal government.

3.

Delays in the availability of solar generation capital equipment.

4.

Delays in the completion of all the H2Neo engineering and class approvals, currently expected in mid-2023.

5.

Failure to secure binding offtake agreements without certainty on generation and electrolysis within agreed timeframes and price ranges.

6.

Differences between projected LCOH ranges and market price expectations.

Tiwi H2 project awarded MPS

The Tiwi H2 project was recently awarded MPS by the NT Government. MPS is awarded to projects in the NT that have significant, strategic impacts and potential benefits for the region. Projects with MPS gain whole of government support, which includes coordination and facilitation, assistance in identifying regulatory approvals, a dedicated case manager and facilitation of engagement with the Australian government.

Under the umbrella of the MPS, Provaris and the NT Government have entered into a project facilitation agreement (PFA) to work in a ‘spirit of co-operation’ to achieve the timely, efficient and effective development of the Tiwi H2 project to maximise the economic and community benefits for the Northern Territory.

In our opinion, this award is a significant step forward as it reduces the risk of delays in approvals and other milestones, and therefore increases the likelihood of the project being delivered in line with the anticipated timetable. MPS is also a significant requirement for international investors looking at the project for investment, offtake and other aspects as it demonstrates a streamlined process for approvals, incentives and potentially key elements including subsidies.

Project timeline clearly laid out to first exports in 2027

First export volumes are not expected until early 2027, but there are several key steps and milestones that are likely to be achieved along the way. The main elements are set out in Exhibit 3 below.

Exhibit 3: Next steps for the Tiwi H2 project

Date

Event

August 2022

Present Northern Territory referral outcomes to Munupi Clan

October 2022

Engage lead engineering group and decision to proceed to pre-FEED

H222

Commence solar monitoring at site

H222/Q123

Hydrogen offtake and project investment

2023

Project financing and engineering procurement and construction (EPC) contractor

Q423

Financial investment decision

Q127

Targeted first hydrogen exports

Date

August 2022

October 2022

H222

H222/Q123

2023

Q423

Q127

Event

Present Northern Territory referral outcomes to Munupi Clan

Engage lead engineering group and decision to proceed to pre-FEED

Commence solar monitoring at site

Hydrogen offtake and project investment

Project financing and engineering procurement and construction (EPC) contractor

Financial investment decision

Targeted first hydrogen exports

Source: Provaris Energy

HyEnergy export project study demonstrates feasibility

In August 2021, Provaris entered into a non-binding memorandum of understanding with Province Resources (ASX:PRL) and Total Eren (collectively the HyEnergy Project Partners) to support a technical and commercial feasibility study relating to the export of c 200,000tpa of green hydrogen from the Gascoyne Region of Australia to nominated Asian markets. This HyExport study has been completed and confirms that such a project is both technically and commercially feasible.

Overview of the project and scope of the study

The HyEnergy green energy production facility is expected to be located close to the coast of Western Australia with a view to producing green hydrogen, largely for export. The study therefore needed to analyse numerous elements of the project, including hydrogen production, compression and loading of vessels, as well as the commercial aspects of the project.

Exhibit 4: Overview of the HyEnergy export project

Source: Provaris Energy

The scope of the completed milestone deliverables and the feasibility study included:

The design of the integrated (with the electrolysers) onshore hydrogen compression facilities.

A review of industry solutions for compressed static hydrogen storage.

Design of the shore crossing and a subsea pipeline from compression facilities to an offshore loading terminal.

The design of the offshore subsea loading terminal using a twin Single Anchor Loading (SAL) solution.

An environmental risk assessment of the marine infrastructure.

Cycle-time analysis for a fleet of H2Neo GH2 carriers.

The design of various types of unloading terminals in destination markets.

Commercial modelling and levelized cost analysis of loading (compression), transport and unloading (decompression) of hydrogen.

Analysis of future short-term and long-term job creation presented by construction and operation.

Hazard identification of the proposed solution.

A recommendation on future studies to advance the HyEnergy export project.

The electrolyser and compression facilities will be co-located, c 6km inland with compressed hydrogen piped to the coast. After consideration of various loading facilities, which ranged from a fixed port option, through near-shore and offshore loading options, the decision was made to focus on an offshore option. This option has several advantages:

Reduced environmental disturbance in sensitive shallow waters.

Significantly lower capital and operating costs.

An accelerated development schedule versus a traditional port that could take five to 10 years to complete.

Operational reliability as SAL allows access in all non-cyclonic weather conditions.

Ideally fit for compression as zero pipe insulation is required and any leakage would not be a risk to marine life.

The application of proven compression technology.

The HyExport study was completed within budget, with funding from the Western Australia Renewable Hydrogen Fund, as part of the Western Australian Government’s Renewable Hydrogen Strategy. A public knowledge sharing report, which will include a summary of the outcomes, is anticipated to be released by the Western Australian Government at a future date.

Hydrogen demand set to grow exponentially

Despite the potential risks outlined above, which are not exhaustive, it should be noted that many market commentators are forecasting substantial growth in the production of and demand for green hydrogen, particularly from hard-to-abate sectors such as heavy industry (steel and cement making for example), power generation, heating and heavy transport. The chart below highlights anticipated growth in global hydrogen production, which bolsters the case for Provaris.

Exhibit 5: Global hydrogen production (total and electrolysis based)

Source: IEA, Edison Investment Research

In 2020, global hydrogen production was c 87Mt, of which only 9Mt was generated via low-carbon methods. Of this 9Mt, the IEA believes that only 5%, or 0.45Mt, was produced via electrolysis, which is therefore barely visible in the chart above. The IEA anticipates that by 2030, total hydrogen production will grow to 212Mt, of which 150Mt will be generated via low-carbon methods, with 54%, or 81Mt being generated via electrolysis. This growth profile fits neatly with Provaris’s anticipated timeline of first export volumes commencing in early 2027.

By 2050, the IEA anticipates that global hydrogen production will more than double, while electrolysis-based production will quadruple between 2030 and 2050. In an effort to achieve greater cooperation, pursue best practice and drive down total end-to-end costs, many countries have signed bilateral agreements. Australia is one of the leaders in this regard, having already signed agreements with several ‘local’ governments including Japan, Korea, Singapore and India. It has also signed bilateral agreements with Germany and, more recently, the UK.

Exhibit 6: Bilateral green energy agreements signed by Australia

Country

Objective

Japan

Issue a joint statement highlighting the commitment already in place between the two countries and recognising the importance of cooperation on an international hydrogen supply chain.

Korea

Develop joint hydrogen cooperation projects with specific action plans.

Singapore

The Green Economy Agreement is designed to strengthen economic and environmental relations.

India

Common objective of driving down the cost of low- and zero-emissions technologies to be cost-competitive with higher-emitting alternatives.

Germany

Formulate new initiatives to accelerate development of a hydrogen industry, including a hydrogen supply chain between the two countries. Focus on technology research and identification of barriers.

UK

Deliver investment into wind, solar and hydrogen energy.

Country

Japan

Korea

Singapore

India

Germany

UK

Objective

Issue a joint statement highlighting the commitment already in place between the two countries and recognising the importance of cooperation on an international hydrogen supply chain.

Develop joint hydrogen cooperation projects with specific action plans.

The Green Economy Agreement is designed to strengthen economic and environmental relations.

Common objective of driving down the cost of low- and zero-emissions technologies to be cost-competitive with higher-emitting alternatives.

Formulate new initiatives to accelerate development of a hydrogen industry, including a hydrogen supply chain between the two countries. Focus on technology research and identification of barriers.

Deliver investment into wind, solar and hydrogen energy.

Source: Government announcements

With anticipated market growth in mind and the Australian government’s drive to forge useful green energy agreements with other near and far away countries, Provaris is engaged in preliminary offtake discussions with potential customers in Japan, Singapore, South Korea and potentially Indonesia.

Exhibit 7: Financial summary

A$m

2019

2020

2021

2022e

2023e

Yea end June

IFRS

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

 

1.1

1.5

0.2

0.0

0.0

Cost of Sales

(1.1)

(1.5)

(0.2)

(0.0)

(0.0)

Gross Profit

0.0

0.0

0.0

0.0

0.0

EBITDA

 

 

0.0

0.0

0.0

0.0

0.0

Normalised operating profit

 

 

0.0

0.0

0.0

0.0

0.0

Amortisation of acquired intangibles

0.0

0.0

0.0

0.0

0.0

Exceptionals

0.0

0.0

0.0

0.0

0.0

Share-based payments

0.0

0.0

0.0

0.0

0.0

Reported operating profit

0.0

0.0

0.0

0.0

0.0

Net Interest

0.0

0.0

0.0

0.0

0.0

Joint ventures & associates (post tax)

0.0

0.0

0.0

0.0

0.0

Exceptionals

0.0

0.0

0.0

0.0

0.0

Profit Before Tax (norm)

 

 

(8.9)

(2.9)

(3.1)

(6.4)

(7.4)

Profit Before Tax (reported)

 

 

(8.9)

(2.9)

(3.1)

(6.4)

(7.4)

Reported tax

0.0

0.0

0.0

0.0

0.0

Profit After Tax (norm)

(8.9)

(2.9)

(3.1)

(6.4)

(7.4)

Profit After Tax (reported)

(8.9)

(2.9)

(3.1)

(6.4)

(7.4)

Minority interests

0.0

0.0

0.0

0.0

0.0

Discontinued operations

0.0

0.0

0.0

0.0

0.0

Net income (normalised)

(8.9)

(2.9)

(3.1)

(6.4)

(7.4)

Net income (reported)

(8.9)

(2.9)

(3.1)

(6.4)

(7.4)

Basic average number of shares outstanding (m)

339.2

393.5

417.3

500.1

583.8

EPS - normalised (c)

 

 

(2.6)

(0.7)

(0.7)

(1.3)

(1.3)

Revenue growth (%)

N/A

34.9

(84.0)

(98.8)

(6.9)

Gross Margin (%)

0.0

0.0

0.0

0.0

0.0

EBITDA Margin (%)

0.0

0.0

0.0

0.0

0.0

Normalised Operating Margin

0.0

0.0

0.0

0.0

0.0

BALANCE SHEET

Fixed Assets

 

 

6.3

6.3

5.8

5.4

5.0

Intangible Assets

6.2

6.2

5.8

5.4

5.0

Tangible Assets

0.0

0.1

0.0

0.0

0.0

Investments & other

0.0

0.0

0.0

0.0

0.0

Current Assets

 

 

2.4

3.2

6.7

12.8

11.2

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

6.6

12.7

11.0

Other

0.0

0.0

0.0

0.0

0.0

Current Liabilities

 

 

(0.1)

(0.3)

(0.2)

(0.2)

(0.2)

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)

(0.0)

(0.0)

(0.0)

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

12.3

18.0

15.9

Minority interests

0.0

0.0

0.0

0.0

0.0

Shareholders' equity

 

 

8.6

9.2

12.3

18.0

15.9

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)

(2.3)

(2.5)

(2.5)

Research and development

(3.2)

(0.1)

(0.0)

(2.0)

(3.0)

Project development

(2.3)

(1.0)

(0.5)

(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

0.2

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

12.0

5.0

Dividends

0.0

0.0

0.0

0.0

0.0

Other

(0.4)

(0.3)

(0.3)

(0.4)

(0.2)

Net Cash Flow

(3.0)

0.7

3.4

6.1

(1.7)

Opening net debt/(cash)

 

 

(5.4)

(2.4)

(3.1)

(6.6)

(12.7)

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)

 

 

(2.4)

(3.1)

(6.6)

(12.7)

(11.0)

Source: Company accounts, Edison Investment Research

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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

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Research: TMT

4iG — Building a Hungarian-owned national champion

4iG’s transformation into a leading national and regional telco continues apace. 4iG, together with the Hungarian state, has announced non-binding heads of terms with Vodafone to acquire a 100% stake in Vodafone Magyarország Távközlési (Vodafone Hungary), Hungary’s second-largest telco, for an enterprise value of HUF715bn (€1.8bn), payable in cash. The transaction represents a multiple of 7.7x EV/adj. EBITDA for the 12-month period ending 31 March 2022. Factoring in management’s expected synergies of HUF150bn, the acquisition multiple falls to 6.1x. The deal is expected to close by the end of the year, subject to confirmatory due diligence, final documentation and regulatory approval. On completion, 4iG will take a 51% stake in Vodafone Hungary, with the Hungarian state owning 49%. Funding has not yet been disclosed. We expect to reinstate our forecasts following the Q222 results in September.

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