MIDAS SHARE TIPS: New methods are being developed to make hydrogen without polluting the planet, so make your profits renewable
The first commercial wind farm was started up in the US almost half a century ago in 1975. But despite all the buzz about renewable energy, wind and solar still accounted for less than 3 percent of the global energy supply before the pandemic. About 80 percent of the rest comes from ‘dirty’ fossil fuels – oil, gas and coal – and the percentage has changed little since the 1970s.
As governments around the world aim for net zero carbon emissions by 2050, something has to change. Much focus is still on wind and sun, supplemented by hydropower, but there is still a strong player in the game of clean energy: hydrogen.
Hydrogen has been used for years to power industrial processes, from steelmaking to oil refining. Made from fossil fuels, it is known as ‘grey’ hydrogen and the market is over £120 billion a year. But gray hydrogen produces a lot of greenhouse gases – 830 million tons per year, about twice the UK’s total annual emissions.
High ambition: HydrogenOne Capital will invest in hydrogen to provide aircraft, ships and trains with clean fuel
Now, however, new methods are being developed to make hydrogen without polluting the planet. Blue hydrogen follows the same process as gray, but the carbon is captured and stored. Green hydrogen is made from water, using wind or solar energy, and new ideas are under development, including hydrogen made from waste.
The potential for this ‘clean’ hydrogen is immense. It can replace gray hydrogen in industrial processes. It can remove the need for diesel generators and it can power trains, buses and trucks – even airplanes and ships.
Overall, clean hydrogen is expected to contribute to 10 percent of global energy over time, and demand is expected to grow 20-fold in the next decade alone. But this coming powerhouse needs cash, with hundreds of companies and projects in the field looking for capital to expand and develop.
HydrogenOne Capital was created to meet that need and provide juicy returns for shareholders along the way.
The company plans to go public at the end of this month, offering shares for £1 each and hoping to raise £250m, with further expansion likely in the coming years. Shares can be applied for through intermediaries such as AJ Bell, Hargreaves Lansdown and Interactive Investor or directly through the IPO prospectus on HydrogenOne’s website.
Some 36 potential investments have already been identified and the group expects to have invested all the money raised in the upcoming listing within 12 to 18 months.
To provide as much variety as possible, HydrogenOne is looking for opportunities worldwide and plans to buy shares in publicly traded companies, established private companies and even individual projects. The first publicly traded clean energy fund,
HydrogenOne is led by two energy industry veterans, JJ Traynor and Richard Hulf, who together have more than 60 years of experience advising and working for major oil and gas companies 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 industrial nous and have built an enviable network of contacts over the decades. Today, Traynor and Hulf don’t just want to make the world a greener place. They also want to make money and aim for an annual growth of 10 to 15 percent from 2023.
Regular dividends are not expected, but there may be one-off payouts over time as investments are sold. However, HydrogenOne is primarily focused on capital appreciation – buying companies, helping them expand, and seeing that expansion reflected in the stock price.
Encouraging individual investors, Ineos, the chemical giant, has agreed to buy shares worth £25m in the IPO, 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 £600 billion by 2040. Traynor and Hulf are starting out small, but they hope to scale up quickly and provide much-needed capital to small and medium-sized companies and also provide returns for investors. The pair know what they are doing, they are well connected and are each investing £100,000 of their own money in the IPO. An attractive long-term purchase.
To be traded on: Main market Contact: hydrogenonecapitalgrowthplc.com or 020 4513 9260 ticker: HGEN