Tuesday, 29 September 2020

Green Homes Grant

Just a brief post to flag-up this new government scheme.

Earlier this year the Chancellor announced a package of green recovery measures worth around £3 billion. Two-thirds of this money will be allocated for energy efficiency home improvements. Starting today, all home-owners in England will be able to apply for vouchers worth up to £5,000 to cover two-thirds of the cost. Those on benefits such as universal credit or those eligible for housing benefit can apply for grants of up to £10,000 covering 100% of the cost.

What Measures are Covered?

To qualify for an award the homeowner (including private landlords) will need to apply for some form of insulation - loft, underfloor, solid wall or cavity wall - or a heat pump - air or ground source, or a solar water heating system. Other measures are then available such as double/triple glazing to replace single glazed windows, energy efficient doors or heating controls. 

Air Sourced Heat Pump


To provide initial help and advice to homeowners, the government have set up a free advice service - Simply Energy Advice

Unfortunately the scheme does not seem to cover the instalation of traditional solar PV panels or battery storage. I am hoping to move house later this year and I was thinking of adding solar so I was disappointed to see this was not included. However I will look into the heat pump option which looks interesting. This initiative should provide a boost to green businesses...including one of my portfolio holdings NIBE (UK).

The grant work should be completed by March 2021 but this date could be extended in the run up to the UK hosting COP 26 later that year.

Monday, 28 September 2020

Ceres Power - Full Year Results


Having had some rewarding returns from my holdings which focus on hydrogen such as AFC Energy and ITM Power, I decided to add Ceres Power to my portfolio earlier this year. Timing is not my strong point and the shares slumped from my purchase price of 427p down to 260p in March but have since seen a strong recovery and reached an all-time high point of 630p in July.

Ceres is another AIM-listed company. It is a world leader in low cost, next generation fuel cell technology which can facilitate the transition to zero-carbon emissions. The technology can be used in a variety of applications - transport, industry, data centres and home heating.

Fuel cell technology is already a core component of energy strategies in Japan, Korea, Germany and the US. Ceres are working with global leaders such as Bosch to embed their technology in mass market products. The stationary global fuel-cell market is estimated to be worth over $40bn by 2030.

In November 2019, the company announced its first zero-emission combined heat and power system designed exclusively for use with hydrogen fuel. The system can operate on all forms of hydrogen but the CHP technology running on hydrogen from renewables such as wind/solar offers a solution to tackling climate change and air pollution.

Expansion

In January 2020, German engineering giant Bosch increased its holding in Ceres from 4% to 18% citing their steel fuel cell technology as potentially the best in the business. Bosch say the market for the fuel-cell power station could be worth €20bn by 2030. Other partners include China's engines giant Weichai Power who hold a 20% equity stake.

The company has licence agreements signed up with four of the world's largest engineering and power companies including Japan's Miura and Doosan of S. Korea who are a global leader in the stationary fuel-cell market.

Solid Oxide Steel Fuel Cell


Results

The company has today released results for the full year to end June 2020 (link via Investegate).

Ceres is growing quickly. Generating income of just under £1m in 2015, they have increased revenues significantly in recent years. Over the past 12 months revenues increased by 21% to £19.9m (2019 £16.4m). Obviously the Covid-19 pandemic has impacted over the last quarter however the full onsite team returned in May and a record number of units were produced and shipped to customers in June.

However, although growing rapidly, they are yet to convert the potential into profits for shareholders. For the last full year to June 2020 the loss was -£6.5m compared to a loss of -£5.9m the previous year. This is partly due to increased investment into electrolysis and the manufacture of green hydrogen.

The company has a strong balance sheet with no debt and cash in the bank of £108 million.

Commenting on the results, CEO Phil Caldwell said:

"The urgency for climate action continues to drive the global demand for clean energy technologies, and our strategy of licensing to global partners, with a leading position in their products and markets, continues to be highly successful. "Despite the disruption from Covid we have delivered a solid set of results, with continued revenue growth and sector leading margins.  This is driven by good progress with our customer programmes and increased manufacturing output thanks to the hard work of the entire Ceres team.

"Trading since the period end has remained strong with good commercial progress with our partners globally.  Bosch has now installed prototype products of its 10kW system utilising Ceres' technology at five locations in Germany while, despite an initial delay in the early part of 2020 due to the pandemic, good progress is now being made to validate Ceres' technology for transportation applications with Weichai's SOFC team in China.

"These developments, combined with the opportunities from our new, long term growth areas of electrolysis for hydrogen, mean that Ceres is very well positioned to build on the strong momentum generated during the period as we look to play our part in delivering clean energy technology to enable a net zero future."

Huge Potential

Whilst there are many companies in the proton membrane fuel cell sector, global companies are signing up solely with Ceres in the solid-oxide fuel cell department where the company is a global market leader.

The company doesn't want to focus on fuel cell manufacturing but rather a technology licensing company working closely with a range of partners who are looking to adapt their business' and address the huge challenges posed by climate change.

Analysts at Berenberg have likened the companies licensing model to ARM Holdings whose RISC technology became the default during the smartphone revolution of the past decade. The broker suggests they could reach 40% to 50% operating margins and generate revenues of £800m each year from licensing agreements with their partners over the coming decade.


Share Price past 12 months

I picked up my initial holding for my ISA at the price of 427p and the current price has taken a dip following the results and stands at 540p which gives a market cap. of £950m. I will look to add on any further price weakness in the coming months.

As ever, this article is merely a record of my personal investment decisions and should not be regarded as an endorsement or recommendation... investing in smaller companies can be rewarding but is higher risk - always DYOR!

Friday, 25 September 2020

Plug Power - Portfolio Addition


Plug Power is a US-based leader in the field of hydrogen fuel-cells. The company has been around for 20 years and was one of the first to commercialise hydrogen fuel-cell technologies and establish markets for various applications. It has developed a range of scalable hydrogen solutions for both mobile and stationary applications. Some high profile customers include the supermarket chains Carrefour and Walmart, BMW, IKEA and also Amazon.

The company manufactures fuel-cell engines for e-mobility and provide back-up hydrogen infrastructure which provides sustainable power solutions for companies looking to transition towards a more  low carbon business model. Applications include fleet vehicles, small-scale industrial robotics, power for data centres and also UAVs/drones.

Expansion

Plug is looking to expand its operations in Europe following the decision by the EU to implement its Green Deal which includes an investment of  $210 billion in green hydrogen over the coming decade.

Earlier this year the company acquired United Hydrogen and Giner ELX for $123 million which will enable PLUG to produce, store and deliver more hydrogen and provide opportunities to supply clean energy solutions in the manufacture of ammonia, concrete, steel and computer chips. This could be a really big deal for reducing climate emissions.

The finance was provided by the issue of a 5 year green bond - a first in the US.



Green

Plug has recently agreed with Brookfield Renewable to energise its green hydrogen production. This will enable Plug to produce 10 tons of clean liquid hydrogen per day.

"We are excited to be partnering with Brookfield Renewable, a global leader in renewable generation, and anticipate opportunities to build upon this relationship in the coming years," stated Plug Power CEO Andy Marsh in the press release announcing the deal. He also noted that "this marks important progress in our steady march to achieve our overall hydrogen strategy of building green liquid hydrogen generation facilities with strategic partners in the U.S. and globally thereafter."

Over the next few years the company plans to become the largest green hydrogen player in the US and globally thereafter!

It has been on my watchlist for some time but what sparked my interest this week was a project to work on the development of a hydrogen fuel-cell airplane in conjunction with Universal Hydrogen. They plan to have a commercial plane in the air by 2024. This could pave the way for larger projects to decarbonise the skies. Early days but exciting prospects!


One year price chart (click to enlarge)

The share price has risen quickly this year from under $4 at the start of 2020 to reach a high of $14 at the end of August. My initial small tranch of shares were purchased in my ISA at the price of $11.40 and currently make up just 1% of my green portfolio. I expect to add to this over the coming months when more funds become available.

As ever, this article is merely a record of my personal investment decisions and should not be regarded as an endorsement or recommendation - always DYOR!

Tuesday, 22 September 2020

Bluefield Solar - Full Year Results


Bluefield Solar (BSIF) was added to my SIPP portfolio in March 2019 and I topped up during the Covid sell-off earlier this year. It's initial focus was purely on solar power in the UK but in July the Company resolved to broaden its focus to include up to 25% in other forms of renewables such as wind and also energy storage and also expand overseas. They have recognised that storage of renewable energy will become a vital part of the transformation towards net zero emissions over the coming years and I certainly think this is a smart move.

 

I would think they will now be looking at onshore wind opportunities and storage which is a sensible move and should add value. Indeed, they have recruited an experienced professional in wind to become investment director so the direction of travel seems clear. It is currently one of the largest solar operations in Europe with net assets under management of around £436 million and generating 470MW of electricity is sufficient to power 150,000 homes.

 

Approximately 60% of solar assets are covered by the old subsidy scheme which provides a guaranteed return for 20 years from the date of connection to the grid. The other 40% have rolling power purchase agreements which generally last for 3 years and are then renewed.

 

Results

 

The company has today issued full year results to end June (link via Investegate). Underlying earnings per share increased by 9.2% to 12.03p and the share price total return including dividends was just 4.7% which is quite a drop compared to the return of 19.1% last year.


The company pays quarterly dividends and will pay out a total of 7.9p for the year which gives a yield of 5.9% based on the current share price of 134p. However, the board have now de-linked dividend increases from RPI which suggests the falling energy prices have become a concern for the future.


The total annualised return for shareholders since launch in 2013 has been 8.7% p.a.

 

Chairman John Rennocks said: 

"We have added consideration of a prudent level of non-solar renewable technologies following the approval of the change the asset mandate and are excited by the opportunities we are exploring in this extended pipeline.

 

We have also continued to actively assess secondary solar asset opportunities and were pleased to conclude the acquisition of 13.6MWp of assets earlier in the year and of 15 solar plants totalling 64.2MWp in August 2020. These investments, totalling £120 million, were financed from increased debt facilities, bringing our borrowings level to where the Board believes is appropriate in the range of 40-50% of GAV. We continue to actively explore other asset opportunities in our pipeline.

 

These acquisitions will underpin our objective to sustain market leading earnings and dividend payments in the years ahead. They enable us to build on the excellent asset performance which has contributed to our ability to convert high levels of irradiation into generation and revenues".

 

Storage


The ability to store excess renewable energy will be the key to a full transition on our path towards net zero by 2050. The government have recently relaxed the rules to encourage far more storage capacity which should be good for the likes of Bluefield. They have excess capacity and spare land which could lead to productive partnerships with storage providers subject to planning considerations.

 


Energy Pricing


According to forecasts from Bloomberg New Energy Finance, UK electricity prices are forecast to decline by 4% per year to around £19/MWh by 2040 from its current price of £45. These lower energy prices are having an impact on the company's net asset value. Obviously this has no impact on those assets which are covered by the long term ROCs and feed-in tariffs backed by the government but it will affect the subsidy-free assets.


The recent fall in wholesale energy prices has obviously put pressure on the Company's model and NAV has fallen. Solar+storage and wind+storage can replace the baseload capacity previously provided by coal and now by gas. Storage is essential to manage the intermittent nature of renewable energy - the wind doesn't always blow and the sun doesn't always shine...especially at night!

 

Future Expansion

 

The trust's portfolio has been fairly stable for the past couple of years with 87 solar 'farms' located mainly across southern England. The UK governments subsidy for renewable infrastructure has now ceased (short-sighted imo) however, the cost of solar has fallen dramatically - 50% reduction over the past five years - and this should provide opportunities for growth.

 

The company are currently looking for opportunities to increase assets and a number of potential sites are currently under consideration to support the next phase of growth.

 

BSIF are in the process of increasing the life expectancy of its solar assets from 25 years to 40 years subject to planning. Successful negotiations have been completed on the majority of existing assets. The boost to asset appreciation over the past year means the discount has been maintained and the shares are currently trading at a premium to NAV of around 20%.

 

My holding in Bluefield Solar accounts for around 5% of my 'green' portfolio which has been gradually building over the past year. I feel comfortable with this and will continue to hold and roll up my quarterly dividends within my SIPP and ISA. I look forward to seeing how the management deal with expansion of the portfolio and whether debt increases but for now it can return to the bottom drawer.


As ever, this article is merely a record of my personal investment decisions and should not be regarded as an endorsement or recommendation - always DYOR!