MIDAS SHARE TIPS: Make your profits renewable with HydrogenOne’s push for clean energy
The first commercial wind farm started up nearly half a century ago in 1975 in the US. Yet – despite all the noise about renewable power – wind and solar still made up less than 3 per cent of global energy supply before the pandemic. About 80 per cent of the rest comes from ‘dirty’ fossil fuels – oil, gas and coal – and the percentage has changed little since the 1970s.
With governments around the world targeting net zero carbon emissions by 2050 something has to change. Much of the focus is still on wind and solar, topped up with hydropower, but there is another strong player in the clean energy game – hydrogen.
Hydrogen has been used for years to power industrial processes from steel manufacture to oil refining. Made from fossil fuels, it is known as ‘grey’ hydrogen and the market exceeds £120billion a year. But grey hydrogen produces lots of greenhouse gases – 830million tons annually, roughly twice the UK’s total annual emissions.
High ambition: HydrogenOne Capital will invest in hydrogen to provide clean fuel for planes, ships and trains
Now, however, new methods are being developed to create hydrogen without polluting the planet. Blue hydrogen follows the same process as grey but the carbon is captured and stored. Green hydrogen is made from water, using wind or solar-powered electricity and new ideas are in development, including hydrogen made from waste.
The potential for this ‘clean’ hydrogen is immense. It can replace grey hydrogen in industrial processes. It can dispense with the need for diesel generators and it can power trains, buses and lorries – even planes and ships.
Overall, clean hydrogen is expected to contribute to 10 per cent of global energy over time, with demand predicted to grow 20- fold in the next decade alone. But this coming power source needs cash, with hundreds of companies and projects in the field looking for capital to expand and develop.
HydrogenOne Capital has been set up to meet that need and provide shareholders with juicy returns along the way.
The company intends to list on the stock market at the end of this month, offering shares at £1 apiece and hoping to raise £250million, with further expansion likely in the coming years. Shares can be applied for via intermediaries such as AJ Bell, Hargreaves Lansdown and Interactive Investor or directly via the flotation prospectus on HydrogenOne’s website.
Some 36 potential investments have already been identified and the group expects to have invested all the cash raised in the forthcoming listing within 12 to 18 months.
To provide as much variety as possible, HydrogenOne is looking at opportunities worldwide and intends to buy stakes in listed firms, established private businesses and even individual projects. The first listed fund dedicated to clean energy,
HydrogenOne is run by two energy industry veterans, JJ Traynor and Richard Hulf, who have amassed more than 60 years’ experience between them, advising and working for oil and gas majors such as BP, Shell and Exxon.
Traynor has a PhD in geology from Cambridge University and Hulf has an MSc in petroleum engineering from Imperial College so they combine academic expertise with industry nous and, over the decades, have built an enviable network of contacts. Today, Traynor and Hulf are not only keen to make the world greener. They also want to make money and are targeting annual growth of 10 per cent to 15 per cent, from 2023.
Regular dividends are not expected but there may be one-off payouts down the line, as investments are sold. Primarily however, HydrogenOne is focused on capital appreciation – buying businesses, helping them expand and seeing that expansion reflected in the share price.
Encouragingly for individual investors, Ineos, the chemicals giant, has agreed to buy shares worth £25million in the flotation, hoping to use increasing amounts of blue and green hydrogen to reduce its own carbon footprint.
Midas verdict: Clean hydrogen is one of the fastest-growing sectors within the green energy market and is expected to be worth at least £600billion by 2040. Traynor and Hulf are starting small but they hope to scale up rapidly, providing much needed capital to small and mid-sized businesses and delivering returns for investors too. The pair know what they are doing, they are well connected and each investing £100,000 of their own money in the flotation. An attractive long-term buy.
To be traded on: Main market Contact: hydrogenonecapitalgrowthplc.com or 020 4513 9260 Ticker: HGEN