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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.
Global Energy Ventures |
MOU signed with HyEnergy Project partners |
Signing of MOU |
Industrial support services |
23 August 2021 |
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Business description
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Global Energy Ventures is a research client of Edison Investment Research Limited |
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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* |
EPS* |
DPS |
P/E |
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
|
|
Research: TMT
EQS Group’s H121 results were strong, showing robust increases in revenue and its customer base. Following its Q321 acquisition of Business Keeper, EQS is now well positioned to capitalise on the time-limited opportunity offered by the European Whistleblowing Directive. Achieving a strong foothold here will be key for driving SaaS customer acquisition, underpinning management’s ambitious short- and medium- term guidance.
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